Ashurst Quarterly Debt Capital Markets Update - Q2 2023

Welcome to the third edition of the Ashurst Quarterly Debt Capital Markets Update for 2023. In this edition, we summarise the key developments in debt capital markets in the second quarter of 2023.

We have a number of different developments to report on in this edition:

• Working Group on Euro Risk-Free Rates guidance on fallback trigger events for EURIBOR products
• Repeal and Replacement of the UK Prospectus Regulation Regime
• European Commission publishes Retail Investment Package
• ESAs publish consolidated Q&As on the EU PRIIPs Regulation
• ESAs report on greenwashing
• Cryptoassets and the UK financial promotion regime
• Climate Transition Finance Handbook and the Sustainability-Linked Bond Principles Updated
• ISSB issues inaugural IFRS Sustainability Disclosure Standards
• Digital Assets - Law Commission publishes recommendations for English law
• Financial Services and Markets Act 2023
• Retained EU Law (Revocation and Reform) Act 2023
• Cessation of the USD LIBOR panel

Working Group on Euro Risk-Free Rates guidance on fallback trigger events for EURIBOR products

On 4 May 2023, the Working Group on Euro Risk-Free Rates published guidance on fallback trigger events and €STR-based fallback rates for EURIBOR. This guidance largely reiterates the recommendations published by the working group in May 2021 and has been published because, in contrast to the international securities market, these recommendations are not generally being adopted in corporate lending products (This is thought to be either because EURIBOR is not scheduled to be discontinued or because forward-looking €STR rates (term €STR rates) were not available in 2021). However, as robust fallbacks are a requirement of the EU Benchmarks Regulation and term €STR rates are now available, the working group believes that there is no impediment to the full implementation of the May 2021 recommendations.

Repeal and Replacement of the UK Prospectus Regulation Regime

On 18 May 2023, the FCA published a series of four "engagement papers" relating to the proposed new UK prospectus regime. The FCA is seeking views on how it should proceed to use the new rule-making powers being granted to it by the UK government as follows:

• Engagement Paper 1: relates to admission to trading on a regulated market;
• Engagement Paper 2: relates to further issuances of equity on regulated markets;
• Engagement Paper 3: relates to protected forward-looking statements in prospectuses; and
• Engagement Paper 4: relates to non-equity securities.

The FCA welcomes written responses to the questions raised by the engagement papers to be received by 29 September 2023 and says it will consult formally on the proposed new rules during 2024.

European Commission publishes Retail Investment Package

On 24 May 2023, the European Commission published its Retail Investment Package. The package consists of:

• a proposed Directive (referred to by the Commission as the Omnibus Directive) amending a number of other Directives, such as MiFID II, the UCITS Directive, the Solvency II Directive, the Alternative Investment Fund Managers Directive and the Insurance Distribution Directive; and
• a proposed Regulation to further amend the EU PRIIPs Regulation.

For more information, see this Ashurst briefing on the Retail Investment Package and this Ashurst briefing on the EU PRIIPs Regulation.

ESAs publish consolidated Q&As on the EU PRIIPs Regulation

On 18 May 2023, the Joint Committee of the European Supervisory Authorities (ESAs) published a set of consolidated Q&As (JC 2023 22) on the EU PRIIPs Regulation regime. This consolidated document combines responses given by the European Commission to questions requiring the interpretation of EU law and responses generated by the ESAs relating to the practical application or implementation of the EU PRIIPs Regulation regime.

ESAs report on greenwashing

On 31 May 2023, the ESAs published their preliminary responses to the European Commission's May 2022 request for input on greenwashing risks and supervision of sustainable finance policies. The Commission had requested input from the ESAs on (i) the definition of greenwashing in the financial sector, (ii) risks posed by greenwashing, (iii) the implementation of sustainable finance policies to prevent greenwashing, and (iv) potential improvements to the EU's current regulatory framework.

These are preliminary responses only, and the ESAs' review process is ongoing. However, it is likley it will ultimately give rise to significant changes to the EU's ESG framework, including changes to the EU SFDR and the EU BMR. A final report from each of the respective ESAs is due next year (scheduled for May 2024 publication) which will include recommendations on those changes.

For more information, see this Ashurst briefing.

Cryptoassets and the UK financial promotion regime

On 7 June 2023, the statutory instrument which brings qualifying cryptoassets into the UK's financial promotions regime was made and on 8 June the FCA published its Policy Statement 23/6 with the near final rules for cryptoasset promotions, as well as a consultation 23/1 on a proposed guidance paper. The statutory instrument and these near-final rules will come into effect on 7 October and 8 October 2023, respectively. For more information, see this Ashurst briefing.

Climate Transition Finance Handbook and the Sustainability-Linked Bond Principles Updated

At the Annual General Meeting of the Green, Social, Sustainability and Sustainability-Linked Bond Principles on 22 June 2023, a number of new or updated publications were announced, including:

• The 2023 edition of the Climate Transition Finance Handbook, its first update since the original publication in 2020; and
• a 2023 update of the Sustainability-Linked Bond Principles.

ICMA serves as Secretariat to the Principles. For more information see the icmagroup.org website.

ISSB issues inaugural IFRS Sustainability Disclosure Standards

On 26 June 2023, the International Sustainability Standards Board (ISSB) issued its inaugural standards:

• IFRS S1 General Requirements for Disclosure of Sustainability-related Financial Information
• IFRS S2 Climate-related Disclosures

with the expectation that this will usher in a new era of sustainability-related disclosures in capital markets worldwide. For more information see the IFRS.org website.

Digital Assets - Law Commission publishes recommendations for English law

On 28 June 2023, the Law Commission published its recommendations for reform and development of English law relating to digital assets. Key features are:

• New legislation: The report concludes that the flexibility of English common law allows for the recognition of a distinct category of personal property that can better recognise, accommodate and protect the unique features of certain digital assets (including crypto-tokens and cryptoassets) but it recommends legislation to confirm the existence of this category and remove any uncertainty.
• A panel of industry experts: The Commission recommends that the government creates a panel of industry experts who can provide continuing guidance on technical and legal issues relating to digital assets as the technology and its uses evolve.
• Securitisation and collateralisation of crypto-tokenisation: The Commission recommends the establishment of a multi-disciplinary project team to provide market participants with legal tools that do not yet exist in English law, such as new ways to take security over crypto-tokens and tokenised securities.

For more information see this Ashurst briefing.

Financial Services and Markets Act 2023

On 29 June 2023, the Financial Services and Markets Act 2023 received Royal Assent. The principal purpose of this Act is to establish the legislative framework for the revocation of all the UK's retained EU law relating to financial services and its replacement using the architecture of the Financial Services and Markets Act 2000 (FSMA), referred to as the "FSMA model" of regulation. This will allow the financial services regulators to make the detailed regulatory requirements subject only to a broad statutory framework established by the government.

Retained EU Law (Revocation and Reform) Act 2023

On 29 June 2023, the Retained EU Law (Revocation and Reform) Act 2023 also received Royal Assent. This Act makes provision to remove from the UK's retained EU law at the end of 2023 its special status and EU-derived features, after which time the UK's retained EU law will be known as "assimilated law".

Cessation of the USD LIBOR panel

On 30 June 2023, US dollar LIBOR set by reference to the quotations offered by a panel of banks, an integral feature of the international capital market since the 1970s, finally came to an end, marking the final cessation of LIBOR rates for any currency set by reference to panel banks' quotations. However one-month, three-month and six-month US dollar LIBOR calculated on a synthetic basis (as CME Term SOFR for the relevant tenor plus the applicable ISDA spread) will be available for use in legacy contracts only until 30 September 2024. For more information see this Ashurst briefing.

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, EU EMIR and LIBOR transition.