The horizon scanner identifies and summarises key EU legislative and non-legislative initiatives that are likely to impact firms providing financial services in the EU, which are grouped thematically.

It also sets out projected timelines for the finalisation and implementation of relevant legislative initiatives, covering approximately the next 18 months to two years.

This horizon scanner has been prepared as of May 2019. It does not constitute legal advice and is not intended to provide an exhaustive list of all provisions or requirements applicable to such firms during this period.

Today’s regulatory landscape

Following the financial crisis and resulting G20 commitments, the EU embarked on an unprecedented and wide-ranging set of regulatory reforms, including new rules to strengthen financial supervision, tools for bank recovery and resolution, more effective deposit protection and an improved regulatory framework for banks, insurance, securities markets and other sectors.

A decade later, this project is now largely complete, with the last major legislative measure of the post-crisis regulatory agenda, MiFID2, which started to apply in early 2018.

More recently, attention has turned to fine-tuning the EU financial services regulatory framework with the adoption of targeted follow-up actions, ensuring that regulation keeps pace with technological development, and completion of the Banking Union and Capital Markets Union.

A year of change for the European Union institutions

There was a significant push to agree outstanding legislative files by mid-April 2019, ahead of the European Parliamentary elections in May 2019. These elections could shake up the current composition of the European Parliament and may shift the current balance of power lead to a change of political agenda. The outcome of these elections may also influence the appointment of the president of the next European Commission, due to take office from November 2019 for a five-year term.

Whilst many legislative proposals were agreed and adopted in the final weeks of the previous European Parliament, others have not yet been agreed. These include proposed regulations on CCP recovery and resolution, creation of a sustainable finance taxonomy, creation of a crowdfunding framework and on the law applicable to third party effects of assignment of claims. It is unclear when and how these outstanding legislative proposals will progress and/or whether any of them may be withdrawn under the new Commission.

2019 is also a year of change for other European Union institutions, with the European Central Bank and European Council are also due to appoint new presidents from November and December 2019, respectively.

Completing Europe’s Economic and Monetary Union

In December 2017, the Commission published a Roadmap for completing Europe’s Economic and Monetary Union (EMU), which included adoption of all remaining proposals on Banking Union during 2018 and finalisation of all pending legislative initiatives for Capital Markets Union (CMU) before the end of the current Commission mandate and EU Parliament elections in mid-2019.

Building blocks for CMU

Following the Commission's mid-term review of the Capital Markets Union Action Plan in Summer 2017, the Commission identified a wide-ranging set of measures that it aimed to put in place by mid-2019, including:

• legislative proposals for greater EU supervisory convergence, including the Omnibus 3 proposals (EP adopted April 2019)
• a legislative proposal for a new prudential regime for investment firms (EP adopted April 2019)
• a legislative proposal on assignment of claims and conflicts of laws (outstanding as at May 2019)
• a FinTech action plan and legislative proposal on crowdfunding (outstanding as at May 2019)
• a legislative proposal to facilitate cross-border distribution of UCITS and AIFs (EP adopted April 2019)
• a legislative proposal on covered bonds (EP adopted April 2019)
• an Action Plan and on sustainable finance and related measures (published March and May 2018; regulations on low carbon benchmarks and sustainable finance were adopted by EP April 2019 but the proposed regulation on creating a sustainable finance taxonomy remains outstanding as at May 2019)

Completing the Banking Union

In October 2017, the Commission called for accelerated progress to agree and adopt various measures to complete the Banking Union by mid-2019, including:

• implementation of the Total Loss Absorbing Capacity (TLAC) standard and amendments to capital requirements to reflect remaining Basel reforms, including the introduction of a leverage ratio and net stable funding ratio (NSFR) (EP adopted under the risk reduction package April 2019)
• finalisation of the proposed European Deposit Insurance Scheme (EDIS) and development of a last resort common fiscal backstop to the Single Resolution Fund, including a credit line from the European Stability Mechanism (ESM) (outstanding as at May 2019)
• new measures to reduce non-performing loans (NPLs) (prudential measures adopted and published in OJ in April 2019; proposed directive setting out other measures outstanding as at May 2019)
• supervising large investment firms carrying out bank-like activities in the same way as credit institutions within the Single Supervisory Mechanism (SSM) framework (EP adopted Investment Firms Review package April 2019)
• the development of sovereign bond-backed securities (SBBS) (EP adopted April 2019)

In his September 2017 State of the Union address, Jean-Claude Juncker also set out his view that all Member States should be encouraged to join the Banking Union.

EMU beyond 2019

Looking further ahead to the period up to 2025, the Commission identified medium term possible steps towards completing the Economic and Monetary Union, including:

• Continuous implementation of CMU measures and roll-out of the EDIS
• Transition to the issuance of a "European safe asset", comparable to US Treasury bonds and changes to the regulatory treatment of sovereign exposures
• Creation of a macroeconomic stabilisation function for the Euro area and changes to EU-level accountability and governance frameworks

Sustainable finance and ESG

The Commission adopted its Sustainable Finance Action Plan in March 2018, as part of a wider commitment to implement the Paris Climate agreement, achieve EU climate and energy targets by 2030 and transition to a low-carbon and resilient economy. In addition to targeted new legislation published under the Sustainable Finance Action Plan, the Commission and ESAs have sought to integrate requirements relating to environmental, social and governance (ESG) factors in a broad range of other financial legislation, including:

• The risk reduction package and new prudential regime for investment firms
• The revised Shareholder Rights Directive (SRD2)
• Level 2 measures under MiFID2, AIFMD, UCITS Directive, Solvency 2, IDD and credit ratings disclosure requirements