EBA's product intervention powers under MiFIR

The Markets in Financial Instruments Regulation (MiFIR) No 600/2014 confers product intervention powers on the EBA and the National Competent Authorities (NCAs) as of the application date of MiFIR on 3 January 2018. According to these powers, the EBA can prohibit or restrict in the Union the marketing, distribution or sale of structured deposits under certain circumstances. The entities to which these powers can be applied are credit institutions authorised under Directive 2013/36/EU (CRD), and firms authorised under Directive 2014/65/EU (MiFID).

Who will have product intervention powers?

EBA, under Article 41 of MiFIR, and NCAs, under Article 42 of MiFIR, will have intervention powers.
 
The other two European Supervisory Authorities, namely the European Securities and Markets Authority (ESMA) and the European Insurance and Occupational Pensions Authority (EIOPA) and their NCAs, will also have intervention powers under MiFIR for ESMA and PRIIPs for EIOPA. The date of application of the intervention powers for these authorities is also January 2018. 

What are the differences between measures adopted by EBA and measures adopted by national competent authorities?

  • Duration of the measure:
EBA shall review measures adopted under Article 41 at appropriate intervals, and at least every three months. If the prohibition or restriction is not renewed after that three-month period, it shall expire.
Measures adopted by NCAs under article 42 can be permanent since there is no legal requirement in MiFIR for the NCAs to review them.
 
  • Territorial scope of the measure:
Measures adopted by EBA apply across Member States in the same manner. This means that all market participants providing services in the European Union must comply with the measures.
Measures adopted by NCAs may apply to market participants established in the jurisdiction of the NCA adopting the measure. Measures may also apply to market participants established in other Member States that carry out business in the jurisdiction of the NCAs adopting the measure.

Against what type of entities can EBA product intervention powers be used?

The entities to which these powers can be applied are credit institutions authorised under Directive 2013/36/EU (CRD), and firms authorised under Directive 2014/65/EU (MiFID).

What are the financial products that can be subject to an EBA intervention?

 
Structured deposits as set out in MiFID Directive 2014/65/EU, which defines a structured deposit as:
"a deposit as defined in point (3) of Article 2(1) of the Deposit Guarantee Schemes Directive, which is fully repayable at maturity on terms under which interest or a premium will be paid or is at risk, according to a formula involving factors such as:
 
  1. an index or combination of indices, excluding variable rate deposits whose return is directly linked to an interest rate index such as Euribor or Libor;
  2. a financial instrument or combination of financial instruments;
  3. a commodity or combination of commodities or other physical or non-physical non-fungible assets; or
  4. a foreign exchange rate or combination of foreign exchange rates"

Which conditions need to be met before the EBA can apply its product intervention powers?

First, there is either:
  • a significant investor protection concern, or
  • a threat to the orderly functioning and integrity of financial markets, or
  • a threat to the stability of the whole or part of the financial system
and, secondly:
  • regulatory requirements under Union law that are applicable to the structured deposit or activity do not address the threats/concern mentioned above; and
  • no NCA has taken action to address the problem or the actions taken by an NCA do not adequately address the problem.