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Ashurst Quarterly Debt Capital Markets Update Q4 2023

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    Welcome to the first edition of the Ashurst Quarterly Debt Capital Markets Update for 2024. In this edition we summarise the key developments in debt capital markets in the last quarter of 2023.
    We have a number of different developments to report on in this edition:

    • EU Benchmarks Regulation - transition period for third-country benchmarks extended to 31 December 2025.
    • European Commission proposes changes to EU Benchmarks Regulation.
    • ESMA - disclosures of climate-related matters.
    • Repeal of the UK PRIIPs Regulation regime – latest developments.
    • EU Green Bond Regulation published.
    • Repeal of the UK Prospectus Regulation regime – latest developments.
    • Bank of England updates approach to resolution.
    • UK Digital Securities Sandbox – effective January 2024.
    • UK extends third-country benchmarks transitional regime until end-2030.
    • European single access point (ESAP) Regulations published.
    • UK Listing Rules reform.

    EU Benchmarks Regulation - transition period for third-country benchmarks extended to 31 December 2025

    With effect from 26 October 2023 Commission Delegated Regulation ((EU) 2023/2222) has extended the transitional period for third-country benchmarks provided by Article 51(5) of Regulation (EU) 2016/1011 (the EU BMR) to 31 December 2025.

    Also on 15 December 2023, ESMA published an updated statement (ESMA80-187-881) on the consequences of Brexit for the ESMA register of benchmark administrators and third country benchmarks under the EU BMR. Due to the extension of the transitional period provided by Article 51(5) of the EU BMR, the change in the ESMA register does not yet have an effect on the ability of EEA-supervised entities to use the benchmarks provided by any third country administrators, including UK ones. The same applies to benchmarks that were included in the ESMA register before 31 December 2020 as a result of recognition or endorsement by the UK. They have been deleted from the ESMA register with effect from 31 December 2020 but the extended EU BMR transitional period (until 31 December 2025) is also applicable to these third country benchmarks.

    Note also ESMA's Q&A 9.3 on the EU BMR (ESMA70-145-114) which was also updated on 15 December 2023 and which clarifies that ESMA considers that the meaning of the term “where the benchmark is already used in the Union” in Article 51(5) of the EU BMR is “where the benchmark is already used in the Union on or before 31 December 2025”.

    European Commission proposes changes to EU Benchmarks Regulation

    On 17 October 2023, the European Commission published its long-awaited legislative proposal to amend the EU BMR. If adopted in its current form, it will (amongst other things):

    • considerably reduce the scope of the EU BMR so that it only applies to critical benchmarks, significant benchmarks, Climate Transition Benchmarks (CTBs) and Paris-aligned Benchmarks (PABs), and excludes non-significant benchmarks.
    • restrict the provision of EU CTBs and PABs to EU administrators.
    • increase the information available on the ESMA benchmarks register, making it a "golden source" of information for in-scope EU entities that want to use a particular benchmark.

    For more information, see this Ashurst briefing.

    ESMA - disclosures of climate-related matters 

    Compilers and users of financial statements are increasingly coming to recognise the growing impact of climate-related factors on conventional financial statements. ESMA has for some time been concerned about the adequacy of financial statements in this regard and this led it to commission and, on 25 October 2023, publish a report entitled "The Heat is On: Disclosures of Climate-Related Matters in the Financial Statements". In a related development, on 22 November 2023, ESMA published three explanatory notes on key aspects of the EU sustainable finance framework:

    • the concept of "sustainability" and its use across the EU sustainable finance framework.
    • the "do no significant harm" principle.
    • the concepts of "estimates" and "equivalent information".

    For more information, see this Ashurst briefing.

    Repeal of the UK PRIIPs Regulation regime – latest developments

    The UK government has announced its intention to repeal the UK PRIIPs Regulation regime and replace it with a new UK-specific retail disclosure regime drawn up by FCA under its new rule making powers. A major step in this process is provided by section 1(1) of, and Schedule 1 to, the Financial Services and Markets Act 2023 (FSMA 2023) which revokes the UK PRIIPs Regulation, but only from a day to be appointed by HM Treasury under section 86.

    Another major step in this process occurred in November 2023 with the publication by HM Treasury of:

    • a policy note describing the new UK retail disclosure framework which will be known as "Consumer Composite Investments" (CCIs) and which will replace the UK PRIIPs Regulation regime.
    • a draft Statutory Instrument (the Consumer Composite Investments (Designated Activities) Regulations 2024) which will enable the FCA to make the necessary rules to deliver the new retail disclosure regime to coincide with the repeal of the UK PRIIPs Regulation regime.

    The government has set a deadline for comments on the draft Statutory Instrument of 10 January 2024. There will also be a formal FCA consultation on its proposed new rules during 2024. However the new regime will only come into effect, and the UK PRIIPs Regulation regime will only be repealed, once the FCA has published its final rules after the consultation and the rules take effect. This is unlikely to be until the second half of 2024.

    EU Green Bond Regulation published

    On 30 November 2023 the EU Green Bond Regulation (Regulation (EU) 2023/2631) was published in the Official Journal. The Regulation entered into force on 20 December 2023 and will largely apply from 21 December 2024, except for certain provisions which apply from 20 December 2023 and the equivalence provisions which will apply from 21 June 2026. For more information, see this Ashurst briefing.

    Repeal of the UK Prospectus Regulation regime – latest developments

    On 28 November 2023 HM Treasury laid The Public Offers and Admissions to Trading Regulations 2023 (the PO&ATRs) before Parliament. This Ashurst briefing discusses the implications of the proposed new Regulations on issues of non-equity securities in the international capital market.

    In May and July 2023, the FCA published a series of six "engagement papers" relating to the proposed new regime seeking views on how the FCA should proceed to use its new rule-making powers under the PO&ATRs. On 12 December 2023 the FCA published a 28-page document discussing at a high level the feedback it has received on the six engagement papers. Amongst the key points to note from this paper are:

    • The FCA is aiming to consult on proposals for new prospectus rules in the summer of 2024, with a view to making final rules in the first half of 2025 (so the current UK Prospectus Regulation regime will remain in place until these new rules are made and in force in 2025); and
    • By and large the engagement papers favoured maintaining the status quo as far the main elements of the UK Prospectus Regulation regime relating to non-equity securities are concerned and the feedback essentially supports this position with any changes being incremental.

    Bank of England updates approach to resolution

    On 15 December 2023 the Bank of England published an update of its approach to resolution (first published in 2014). It provides an overview of the UK's resolution regime and guidance on the way the Bank carries out its statutory responsibilities as the UK resolution authority including: the objectives and key features of the resolution regime, the main strategies the Bank has developed to deal with failing banks and the arrangements for safeguarding the rights of depositors, clients, counterparties and creditors; how the Bank is likely to implement resolution; and the Bank’s approach to resolution planning, third-country recognition and international co-ordination.

    UK Digital Securities Sandbox – effective January 2024

    On 18 December 2023, the Financial Services and Markets Act 2023 (Digital Securities Sandbox) Regulations 2023 (SI 2023/1398) were published on legislation.gov.uk, together with an explanatory memorandum.

    The Regulations will create the framework that will enable the Bank of England and the FCA to operate a Digital Securities Sandbox (DSS). The DSS will allow firms and the regulators to test the use of developing technology (such as distributed ledger technology (DLT) or technology that facilitates digital assets). The Regulations entered into force on 8 January 2024 and will cease to have effect on 8 January 2029. The Bank of England and the FCA will provide guidance in due course on the operation of the DSS.

    UK extends third-country benchmarks transitional regime until end-2030

    On 19 December 2023, the Financial Services and Markets Act 2023 (Benchmarks and Capital Requirements) (Amendment) Regulations 2023 (SI 2023/1409) were published.

    Regulation 3 amends Article 51(5) of the UK Benchmarks Regulation ((EU) 2016/1011) (UK BMR) to extend the expiry date of the transitional period for third country benchmarks from 31 December 2025 to 31 December 2030. It also extends the provision that permits continued use of a legacy third country benchmark by UK markets so that, where a benchmark is used in an existing contract, financial instrument or for measuring the performance of an investment fund on 31 December 2030, it may continue to be used on and after 1 January 2031. UK supervised entities will be permitted to continue with only legacy use of third country benchmarks on and after 1 January 2031.

    European single access point (ESAP) regulations published

    On 20 December 2023:

    • Regulation (EU) 2023/2859 establishing a European single access point providing centralised access to publicly available information of relevance to financial services, capital markets and sustainability; and
    • Regulation (EU) 2023/2869 amending certain Regulations as regards the establishment and functioning of the European single access point, were each published in the Official Journal and will enter into force on 10 January 2024. On the same day, Directive (EU) 2023/2864 amending certain Directives as regards the establishment and functioning of the European single access point was also published in the Official Journal.  Member states will have until 10 January 2026 to transpose the Directive into national law, except for Article 3 (relating to the Transparency Directive), for which they have until 20 July 2025.

    UK listing rules reform

    Since the UK's decision to leave the EU the government has launched a number of reviews of the functioning of the UK capital market. On 20 December 2023 in the latest instalment of this process the FCA published Consultation Paper CP 23/31 which contains its detailed proposals for listing rules reforms.

    The key proposed reform is to create a single category for UK listings of equity shares in commercial companies. This will replace the current premium and standard listed share categories for commercial companies with a single rule set for commercial companies. As expected, the FCA is not proposing any material changes to the listing rules for non-equity securities, nor for the majority of other standard listed instruments. The FCA proposes to give effect to these new rules by replacing the current Listing Rules sourcebook in the FCA Handbook with an entirely new sourcebook, which will be called the "UK Listing Rules" sourcebook (UKLR).

    The consultation period for the proposals regarding the replacement to the current LR sourcebook closes on 22 March 2024. The FCA aims to implement these changes by the start of the second half of 2024.

    Visit our Finance Hub for analysis and commentary on developments affecting global financial markets, including the EU Prospectus Regulation, the EU Benchmarks Regulation, PRIIPs/KID and EU EMIR.

     

     

     

     

     

     
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