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Financial Services – connected?Responding to the new regulatory environment

November 2016

Table of contentsEMIR - Where do you stand now? 2

Revised Transparency Directive: Will I be affected? 4

The SRM: a fundamental sharp step for the Banking Union? 6

MiFID II - Ready for implementation? 8

European securitization - A revival soon? The next chapter 10

How is PSD2 impacting your activity? 12

EU audit reform: how audit committees can prepare for performance monitoring? 14

Wealth Management. Could your clients’ needs be your competitive advantage? 16

Introduction of the RAIF – The Luxembourg AI vehicle of choice? 18

GDPR – why take the risk and be sanctioned? 20

Customer Tax Reporting 22

Global Fund Distribution 24

Connect with us 26

Dear Clients and Friends,

Welcome to the November 2016 edition of EY Luxembourg’s publication responding to the regulatory environment, applicable to the wealth and asset management, banking and insurance industry from a Luxembourg perspective. The Financial Services – connected? will help you to be informed about the recent regulatory developments, the actions to be taken and the solutions provided by our expert services.

In this issue, we would like to draw your attention to Luxembourg’s new alternative investment vehicle, the RAIF. The new Luxembourg RAIF Law entered into force on 1 August 2016 and introduces a new and innovative investment vehicle to the Grand-Duchy for well-informed investors. In their article The introduction of the RAIF – The Luxembourg alternative investment vehicle of choice? Olivier Coekelbergs and Carmen von Nell-Breuning provide an overview of the new regime for investors looking to structure their investments through Luxembourg while benefiting all the advantages of a SIF and SICAR. The RAIF will probably be the vehicle of choice for those looking to achieve enhanced structuring and operational efficiency under the roof of the AIFMD while benefiting from a significantly reduced time-to-market, moreover to enhanced flexibility to the unregulated limited partnerships.

We hope you will appreciate and enjoy reading the highlights of this version of Financial Services – Connected? and the insights provided therein:• EMIR – where do you stand now? Taking

up the next challenges from Denis Costermans and Jean-Christophe Cabilin

• Revised Transparency Directive: Will I be affected? Bruno Di Bartolomeo and Thierry Bertrand focus on consequences for Luxembourg players

• The SRM: a fundamental sharp step for the Banking Union? Vincent Galand and Phong Nguyen provide insights

• MiFID II: Ready for implementation? Moving from analysis to implementation from Denis Costermans and Benjamin Accadia

• European securitization – A revival soon? Oliver Cloess and Jaffer Ahsan look forward to the next chapter: progress or road block?

• How is PSD2 impacting your activity? Patrice Fritsch explains all you need to know about the revised directive

• EU audit reform: how audit committees can prepare for performance monitoring? Insights from Sylvie Testa and Bernard Lhoest

• Wealth Management. Could your clients’ needs be your competitive advantage? Olivier Maréchal and Denis Costermans on how to prepare to grow through this period of rapid change

• GDPR – why take the risk and be sanctioned? Francois Barret and Olivier Maréchal on the European data protection reform

We look forward to receiving your feedback on [email protected] as well as discussing the challenges and opportunities with you and our subject matter experts.

Kind regards,

Bernard LhoestPartnerBanking & Capital Markets Leader EY, Luxembourg

1Financial Services – connected? |

EMIRWhere do you stand now?

Impact to the industry

All eyes are currently on the entry into force of the clearing obligation for eligible instruments. The clearing obligation is phased by instrument type and entity categorization. Article 2 of Regulation (EU) 2015/22052 imposed four categories to distinguish between impacted entities, of which those categories in turn also determine the entry into force of the clearing obligation for the latter:

Delegated Regulation No. 1 (August 2015) IRS in the G4 currencies

Delegated Regulation No. 2 (March 2016) Index CDS

Delegated Regulation No. 3 (June 2016) IRS denominated in some EEA currencies

Entr

y in

to fo

rce

date

Cat

egor

y 1 Financial counterparties which are

also clearing members – major central counterparties (CCPs) have published the list of their clearing members

21 June 2016 9 February 2017 9 February 2017

Cat

egor

y 2

Financial counterparties above the €8b threshold (month-end average of outstanding gross notional amount of centrally cleared derivatives for January, February and March 2016 at group level) or alternative investment funds that are non-financial counterparties and above the €8b threshold

21 December 2016 9 August 2017 9 August 2017

Cat

egor

y 3 Financial counterparties below the €8b

threshold or alternative investment funds that are non-financial counterparties and below the €8b threshold

21 June 2017 9 February 2018 9 February 2018

Cat

egor

y 4 Non-financial counterparties not included in

Categories 1, 2 or 321 December 2018 9 May 2019 9 August 2019

Other instruments to monitor include foreign exchange non deliverable forwards (FX NDF).

Taking up the next challenges

Oversight Categorization Preparedness

The European Market Infrastructure Regulation1 (EMIR) in force since 2013, with risk mitigation techniques for bilateral clearing. In 2014 a new and substantial daily trade reporting obligation was imposed. Three years on, the final phase of EMIR arrived: the progressive entry into force of the clearing obligation for eligible instruments which started in June 2016 and, for the non-centrally cleared over-the-counter (OTC) derivatives, the margining process where the release of the final regulatory standards is expected by fall of 2016.

1 Regulation (EU) No 648/2012 of the EU Parliament and of the Council of 4 July 2012 on OTC derivatives, central counterparties and trade repositories (EMIR - relevant in the European Economic Area (EEA) which includes EU Member States and Iceland, Liechtenstein and Norway)

2 Commission Delegated Regulation (EU) 2015/2205 of 6 August 2015 supplementing Regulation (EU) No648/2012 of the European Parliament and of the Council with regard to regulatory technical standards on the clearing obligation (EEA relevant)

2 | Financial Services – connected?


Denis CostermansDirecteur Associé - Advisory +352 42 124 [email protected]

Jean-Christophe CabilinManager - EMIR subject matter expert+352 42 124 [email protected]

EY point of view

The Luxembourg landscape is quite particular when it comes to EMIR for the simple reason that many players delegate their EMIR duties either to their parent company, often observed in banking, or to service providers in the funds industry for instance.

As a result, looking at what has been implemented following the first two pillars of the regulation (i.e., risk mitigation requirements and trade reporting), EY Luxembourg has observed that delegation arrangements are all too often not associated with a formalized and robust oversight framework from part of the delegate. There is still work to do to consolidate what has been put in place for the provision of risk mitigation techniques under EMIR, and now it is time to act.

The question of how national competent authorities and European Securities and Markets Authority (ESMA) will actually be able to use the enormous amount of transaction data sent by reporting entities is ongoing; moreover the trade repositories themselves face issues with inter-operability and the challenging task of reconciling trade reports (i.e., the pairing process). In February 2017, the so called backload reporting where all transactions entered into before August 2012 and outstanding in February 2014 will need to be reported. Some rumor has been heard about the possible removal of that requirement, but until anything is certain, can you actually afford not being prepared?

EY Solutions

The clearing obligation reshapes trading models with a number of questions that need to be rapidly answered e.g., the choice between direct or indirect clearing models, the selection of clearing brokers, the protection of client assets and segregation of accounts, the frontloading for categories one and two, not forgetting the treatment of the OTC derivatives which remain uncleared and the necessary associated collateral management capabilities to implement. It is not only about compliance, it is about reshaping your post-trade operational set-up.

With this is mind, EY Luxembourg provides support to firms in:• Assisting to achieve compliance in an evolving EMIR environment by conducting a

review of their current status and implementation projects• Assessing and strengthening their oversight framework in order to organize the

necessary governance when functions are delegated• Analyzing and implementing the clearing obligations and margining process, with

a number of EY accelerators

Work step

1. OTC Reform Impact Analysis and Project Approach

2. Rules and Regulations Governance and Impact Analysis

3. Clearing Broker Selection and Validation/Review of the CCP’s

4. Due Diligence of Clearing Brokers and CCP’s

5. Service Provider Product / Service Assessment

6. OTC Readiness Implementation

Objective

• An assessment of the impacts of Regulatory Reform to the firm’s Operating Model and an approach for readiness

• A cross disciplinary process to monitor, manage and address rules and regulations as they evolve and the appropriate response by the industry

• The selection of the Clearing Brokers to support OTC Clearing

• The selection of CCP’s to support required product set

• Due Diligence on Clearing Brokers and Clearing Houses prior to implementation

• Assess Service Providers OTC Derivatives Product and Service Set for Clearing Brokers and Service Providers

• Implementation of the change programme internally to support OTC refor

• Generic Operating Model Impact Assessment• Generic Service Provider Impact Assessment• Governance for Implementation

• Regulatory Governance (Change/Compliance/Legal)

• Rules and Requirements Matrix• Governance for Implementation

• Clearing Broker Selection Approach • RFI Question Bank• Workshop Templates• Clearing Broker RFI Heat Map• Clearing Broker Workshop Templates

• Due Diligence Questionnaire Template• Workshop Templates• Due Diligence Visits• Provider Strategic Outlook Template

• Insight from Clearing Broker and Service Provider selection process

• Peer Analysis • Benchmarking and proprietary research• Aggregated RFP’s

• Project Governance and Planning Tools• CB on-boarding plans and management• Internal change management• Management of service providers and

vendors

EY accelerators

Revised Transparency Directive: Will I be affected?


The European revised Transparency Directive aims to simplify certain issuer’s obligations, improve the effectiveness of the existing transparency regime, including investor protection, but also to provide additional flexibility and thereby reducing administrative burdens. The transposition to Luxembourg Law impacts inter alia:• Transparency:

• Amended definition of home Member State• Reduction of administrative burden• Greater transparency on payments for governments• Disclosure obligations to major holdings• Strengthening sanctioning powers

• Prospectus: more flexibility in particular cases

Next to the Law on transparency requirements, Luxembourg issued a Grand-Ducal Regulation (GDR) repealing articles on the choice of home Member State and requirements of quarterly financial reporting based on the GDR of 11 January 2008. The CSSF provided clarification in its press release 15/49 and in June 2016 updated the questions and answers document and two circulars: • Circular 03/349 was adjusted (by way of Circular 16/638) and

now contains the required updated information relating to the details regarding the information to be notified with respect to major holdings (in particular detailed information regarding the new aggregation rule (Article 12bis))

• The main transparency circular (i.e., Circular 08/337) was adapted (by way of Circular 16/637) and now reflects the amended rules introduced by the new Luxembourg Transparency Law

EY point of view

This initiative is to ensure transparency of information for investors and to promote coherent application throughout EU countries. • The definition of the home Member State of a third country

issuer was simplified. It now provides clarity to issuers of securities, including determination and communication of the home Member State, and rules in case the issuer has omitted to inform the competent authorities and to make public announcement of their choice of the home Member State within three months since trading of the securities

• Sanction regime has been strengthened and reinforced compliance as counterpart to the softening of the reporting requirements

• New reporting requirements provide less administrative pressure and more flexibility to listed companies

• The deadline to report half-year reports has been extended from two to three months which is probably a good step to reinforce the quality of such reports. The quarterly reporting requirement was abolished, however, companies can choose to carry on.

• Increased transparency requirements on transactions undertaken with and to government bodies in the countries in which they operate and increased obligations in relation to major holdings

• Companies who are active in the extraction and logging of primary forest industries need to report annually on the payments done to government bodies and agencies in the countries where they operate

What are the consequences for Luxembourg players?

Home Member State

Greater transparency

Pragmatic reporting

On 15 May 2016, the Luxembourg Law of 10 May 2016 (the Law on transparency requirements) implementing amendments to the Luxembourg transparency law for issuers of securities has entered into force. It amends both the Law of 11 January 2008 on transparency requirements and the Law of 10 July 2005 on prospectuses. It transposes also the revised European Transparency Directive 2013/50/EU3 by providing rules for issuers with securities admitted to trading on a European Union (EU) regulated market.

3 Directive 2013/50/EU of 22 October 2013 amending Directive 2004/109/EC on the harmonization of transparency requirements in relation to information about issuers whose securities are admitted to trading on a regulated market



EY Solutions

The European revised Transparency Directive is implemented into Luxembourg’s legislation and the Luxembourg Law on transparency requirements entered into application. We recommend listed companies or entities having financial instruments listed on a regulated market to undertake the following immediate actions:• Review the revised transparency obligations and identify

whether they are impacted, and the nature of impacts• Analyze the transparency requirements, especially for issuers of

securities• Analyze the reporting responsibilities and options, in the light of

the new legislation

EY Luxembourg offers the following solutions to cope with the challenges of the revised legislation:• Awareness sessions, topic-focused workshops, and impact

assessments to identify whether and how the firm is in scope• Gap analysis on your organization, activities, operations, process

and documents, and implementation planning and management• Review of compliance requirements of management reports• Luxembourg’s team of subject matter experts of our Financial

Accounting and Advisory Services (FAAS) is available to help our clients to implement the key requirements of the new regulatory transparency requirements to their reporting framework • The team comprises a number of professionals being

multidisciplinary subject matter experts of accounting, tax, and IT with deep, sector-specific experience in managing the implementation of accounting changes, ranging from a single accounting standard to the full project planning and global implementation of IFRS

• Our practice provides assistance on critical issues arising from changes in accounting standards and regulatory requirements, new business activities and business acquisitions. We help CFOs, audit committees, treasurers, and other top financial executives understand the pending changes and assess the impact on their companies

• Get it right and keep it right: as business advisors, the main focus of our FAAS team is to help our clients to navigate the ever-changing accounting and reporting landscape efficiently, timely and cost-effective on a global scale

• Assisting companies in the restructuring process of the financial reporting requirements and implementation of the reporting process

• Running training or workshops to clarify the transparency criteria

• Assisting clients reviewing/amending prospectuses, including assisting with the coordination of the regulatory approval of those changes and with the notification thereof to security holders

Bruno Di BartolomeoPartner - Real Estate services, Assurance services +352 42 124 [email protected]

Thierry BertrandPartner - Financial Accounting Advisory and Reporting Services Leader+352 42 124 [email protected]

EY point of view

Despite all regulatory and industry reforms undertaken since the financial crisis, it is acknowledged that banks may still have difficulty, with the need to prevent systemic consequences and contagion.

The SRM is designed to improve the resilience of the banking system across the EU zone and to clarify that resolution decisions are taken in a harmonized and efficient manner to ensure that prospective bank resolutions will not be reliant on sovereign funding.

The SRM furnishes an integrated governing structure aligning resolution under the SRM with the supervision of the SSM. The BRRD5 will regulate the interaction between the SRB and the national authorities in non-participating EU Member States. The SRM applies to banks established in EU Member States participating in the SSM as well to other entities captured in their consolidated supervision, i.e., it applies to: • Credit institutions (i.e., banks and certain other deposit-takers),

as defined in the Capital Requirements Regulation (CRR)• Parent undertakings, including financial holding companies

and mixed financial holding companies, subject to consolidated European Central Bank (ECB) supervision under the SSM

• Investment firms and financial institutions, as defined in the CRR, when covered by consolidated ECB supervision of the parent undertaking under the SSM

The SRM: a fundamental sharp step for the Banking Union?

Within the process of creating a Banking Union for increasing the financial system stability, the foundation is represented by four pillars: Single Rule Book, Single Supervisory Mechanism (SSM), SRM and a harmonized Deposit Guarantee Scheme. Since January 2016, the SRM launched two drills molding the European Union (EU) banking system: assessment of EU banks’ resolvability and establishing minimum requirements for own funds and eligible liabilities (MREL).


During a period of eight years, a Single Resolution Fund (SRF) will be set up for collecting contributions from the industry.

At the warning of the SSM authorities, the SRM will be activated for the banks with severe financial difficulties of which a Single Resolution Board (SRB) will be set up among representatives of national authorities. The European Commission and SSM decide when the bank will enter resolution and establish an implementation strategy, whereas national authorities will be responsible with the compliance and execution of the strategy.

The SRM provides substantial prerogatives to participating resolution authorities for imposing measures to institutions, including measures aiming at removing impediments to resolvability, and the legal capacity to enforce the conversion or write-off liabilities (bail-in waterfall – see next page for structure) to facilitate the achievement of resolution objectives. It also foresees MREL subject to this bail-in mechanism, which institutions will have to maintain on an ex-ante basis and report. The SRM will not just impact institutions in the event of their resolution, but also in their choices of target operating models when these affect their resolvability, in their asset and liability management (ALM) and the recoverability of their exposures to other institutions.

Resolution Resolvability MREL

The SRM4 is the last line of defense for limiting potential damages to the economy and financial system of the failure of credit institutions.

4 The Single Resolution Mechanism (SRM) Regulation applies since January 2016 solely to participating Member States, i.e., euro-zone countries and other EU Member States that freely elect adhering to it

5 The Bank Recovery and Resolution Directive (BRRD), in force since July 2014, applicable to all EU countries and to be transposed into national regulation by January 2015 while the bail-in provisions were due to implement at national level by January 2016. Transposition in Luxembourg mainly occurred through the Law of 18 December 2015 on the failure of credit institutions



Vincent GalandDirecteur Associé - Banking Risk Management and Prudential Regulation Leader+352 42 124 [email protected]

Phong NguyenManager - Banking Risk Management and Prudential Regulation subject matter expert+352 42 124 8407 [email protected]

EY Solutions

Resolution planning conducted by SRM authorities is likely to incur significant charges and constraints on an institution unless it adopts the following initiatives:• Conducting internal assessments analyzing the strengths and

weaknesses regarding resolvability • Opportunity to cooperate with the authorities for addressing

prudential assessments, resolution strategies and resolvability planning

• Providing timely and high quality data• Assessing the entanglement and identifying the elements that

might increase MREL requirements• Benefiting from lower MREL requirements in case comfort is

provided to national authorities and SRB• Determining the resolution strategy reflecting group strategy

and resolution planning• Embracing the resolvability culture

EY Luxembourg disposes of consistent understanding of the recovery and resolution planning process generated from various projects developed over the years across several jurisdictions, providing us an intensive experience in dealing with the supervisors. EY Luxembourg can provide assistance, advisory and support in:• Organization of the resolution planning • Strategy preparation• Drafting the internal resolution plan• Resolvability assessment• Implementation of changes within the business model• Preparing for dialogue with the resolution authorities• MREL optimization• Data preparation• Recovery and resolution implementation

SRM measures

CET1

Bail-

in w

ater

fall

Regulatory capital instruments: going-concern liabilities

Gone-concern liabilities

AT1

Other subordinated debt

T1

Other eligible liabilities, including:• Senior unsecured debt, corporate deposits, then• Household and SME deposits above €100,000

1

2

3

4PoNV

5

MiFID II Ready for implementation?

The countdown has now accelerated: MiFID II will apply from 3 January 2018, less than 14 months to go! Many firms have conducted their analysis over the last months and are now mobilizing teams to launch the implementation phase. Still, many others have just planned to start the analyses over this quarter. For all firms however, 2017 will be a challenging time to implement all MIFID II requirements.


The MiFID II package6 covers a large number of areas, which impact the entire client relationship, from first contacts with the prospects down to the provision of services as well as the organization of firms. The external environment of the firms is impacted too, with an in-depth transformation of the market infrastructure and changes in the supervision framework and the governance of the firms.

Impacts may be far reaching and go well beyond the traditional regulatory areas: it is definitely the business and the operational models which are touched. Firstly, MiFID II will require banks to review the way they approach and serve clients completely. The reasons must be found in the new inducements regime, with impacts on the distribution approach and the service offering, and in the unprecedented level of transparency foreseen in MiFID II, from such obligations as costs and charges, conversation recording or suitability report. Impacts on the execution hubs will be critical too, as the market infrastructure will evolve towards more regulated and transparent execution for basically all instruments, including current over-the-counter (OTC).

Asset management is impacted as well: both, management companies and securities services firms. Main impacts are on the funds distribution, the execution of orders and indirectly on asset servicing due to the support to the funds, with pressures for such support.

EY point of view

MiFID II is broad and complex and now is the time to move to implementation. Such projects are typically at least as large as for MiFID I, with significant changes in the IT systems. The size of such projects varies among banks in Luxembourg, from a few hundred thousand euros to more than five million from our observations.

The IT work is a very important part of the implementation projects. It includes changes in the core processing of transactions, for suitability and appropriateness as well as for reporting. Data management is also another important aspect, for the reporting to authorities or to clients, with an exceptional level of granularity and complexity. Other technical aspects include recording of conservations, reconciliation and reporting of inducements or, for some, market transparency. Besides IT, each step of the client’s relationship will be impacted and the full front to back process must be reviewed, with new steps, new information to provide, new documents for clients, new controls, new procedures and a real need for training.

The last quarter of 2016 should be used to finalize the impact assessment, to make the strategic decisions and to plan and budget for implementation. Firms should be ready to start with the detailed analysis and implementation from early 2017. One year to go through all detailed analyses, IT developments and testing, plus all other process and regulatory areas is short, very short.

MiFID II Implementation Readiness

Moving from analysis to implementation

6 MiFID package is composed of: Directive 2014/65/EU of the EU Parliament and of the Council of 15 May 2014 on markets in financial instruments and amending Directive 2002/92/EC and Directive 2011/61/EU (MiFID II – EEA relevant) as well as Regulation (EU) 600/2014 of the EU Parliament and of the Council of 15 May 2014 on markets in financial instruments and amending Regulation (EU) No 648/2012 (MiFIR – EEA relevant)



EY Solutions

EY Luxembourg’s team has developed unrivalled expertise in MiFID II, leveraging the projects we have conducted in Luxembourg and abroad since 2014, our broad connections in the market and our network of international experts forming the EY EMEIA MiFID practice, which offer our clients access to the market practices.

We have developed proven solutions to help the firms in the banking, asset management and asset servicing industries. Impact assessment phase:

EY Solutions Your BenefitsAwareness sessions and training organized with the senior management, the Business departments or the control functions aiming at introducing MiFID II and getting a first understanding of the impacts on the firm

MobilizationGeneral understanding

Impact assessment: Gap Analysis Phase 1, workshop sessions to review all MiFID II obligations, identifying the impacts on the firm and qualifying the importance to the firm

Key impacts, with quick results

Gap analysis: Gap Analysis Phase 2, for each MiFID area, analysis of the current situation and identification of the gaps and the remedial actions

Full analysisPlan for actions

Advisory panel: support of a selection of MiFID experts to coach the internal MiFID teams in the firms, providing expert opinions, market practices or reviewing delivery

In-house project, but supported by EY

MiFID I health check: quick diagnosis of MiFID I situation, as a foundation for implementing MiFID II

MiFID I assurance

Implementation phase:

EY Solutions Your BenefitsProject management: managing the full MiFID project and its complexity, to ensure the ongoing progress and the connections with all parties

Successful project delivery

Strategic analysis: focused analysis on specific aspects which may have strategic impacts (e.g., advisory, investment research, distribution, inducements)

Market practiceExpert analysis

Functional analysis: assistance in the functional analysis required to prepare the IT changes (e.g., reporting, sampling and analysis (S&A) tests)

MiFID II experienceDelivery capacity

Suitability and appropriateness approach: design of S&A approaches able to comply with MiFID II while supporting the commercial relationship with the clients

MiFID II experienceMarket practices

Costs and charges analysis: assistance in the costs and charges analysis and design of ex-ante and ex-post approaches

MIFID II and PRIIPs expertiseMarket practices

Review of execution model: assistance in reviewing order execution models from a compliance, as well as strategic perspective to assess impact of enhanced market transparency

MiFID II experienceDelivery capacity

Transaction reporting: assistance in the transaction reporting analysis, both from a functional and IT perspective

MiFID II expertiseAccelerator

Product governance process: design the new product governance process and related arrangements, from manufacturer or distributors sides

Market practices

Documentation: e.g., analysis and update of all supporting documents, including: procedures, policies, contracts

Updated framework

Training: design and provision of trainings to staff, on the different MiFID II topics as implemented in the firm, including: background

Trained staff with MIFID experts

Advisory panel: support by a selection of MiFID experts to coach the internal MiFID teams in the firms, providing expert opinions, market practices or reviewing delivery

In-house project, but supported by EY

Design new compliance framework: redesign of the compliance framework to take into account the new MIFID II provisions and control priorities

MiFID II under control

Denis Costermans Directeur Associé - MiFID and Market Regulation Leader+352 42 124 [email protected]

Benjamin AccadiaManager - Financial Services, Advisory+352 42 124 [email protected]

European securitization A revival soon? The next chapterProgress or road block?


The proposed STS regulation was considered to be a milestone for the revival of the securitization industry. While the proposed regulation passed the review of the European Parliament, the latter published in June 2016 the draft report on the proposal for a regulation of the European Parliament and of the Council laying down common rules on securitization and creating a European framework for simple, transparent and standardized securitization which introduces in total 108 amendments of varying importance. The below is a selection of amendments:• Amendment 40: Introduction of a 20% general risk retention rate • Amendment 55: Introduction of disclosure requirements on

the investors in the securitization and their ultimate beneficial owner, the size of their investment and to which tranche of the securitization it relates to

• Amendment 73: Introduction of publication requirements on the long-term, sustainable nature of the securitization for the investors, using environmentald governance criteria to describe how the securitization contributed to real economy investments and in which way the original lender used the freed-up capital

• Amendment 74: Introduction of the requirement to disclose and publish an explanation of how the capital relief attained through STS securitization helped to fund new-lending

EY point of view

The draft report has the potential to ban all securitizations and introduce significant burden.

The risk retention concept was introduced years ago to align the interest of originators and investors with a rate of 5%. Amendment 40 intends to increase the rate to 20% which would no longer represent a skin, but rather a backbone-in-the-game as consequently all significant risks would be retained at the originator. No investment is risk free, so why should a securitization position be?

Amendment 55 aims to publish information on the investor, its ultimate beneficial owner, the size and the tranche of the investment. This information is likely to be available once the securitization positions have been subscribed and hence are not relevant for the decision making investment process.

Amendments 73 and 74 introduce publication requirements on how a particular securitization influences real economy investments, how the initial lender uses the freed-up capital and how capital-relief helps to fund new lending. How to measure the specific effects of a particular securitization? When publishing a general statement, would this contribute to the objectives of the STS regulation? When specific information is identifiable, would the effects not materialize subsequent to the securitization placement and being influenced by other economic/financial effects within the initial lender?

Simple Transparent Standardized

Securitization is a transaction that enables to refinance asset pools, by converting them into securities. The European Commission identified the revival of simple, transparent and standardized (STS) securitizations as priority since they are recognized as a key element of well-functioning financial markets. A European regulation implementing common STS securitization rules was proposed and submitted to the European Parliament for review. Now the proposed regulation was reviewed and markets wonder if a revival can take place.



EY Solutions

In order to support institutional securitization along with investors and originators in mastering the challenges of the proposed STS Regulation and the proposed capital requirements regulation (CRR), EY Luxembourg proposes the following services:• Investor management reporting GAP analysis and assistance for

the optimization of due diligence processes• Setup/GAP analysis of prudential reporting processes for the

quantitative optimization of capital requirements• Originator process GAP analysis and optimization• Assurance services to comply with qualitative STS criteria and

quantitative confidence levels

Luxembourg is a major domicile for securitization companies and EY Luxembourg complements this by providing the above mentioned professional services offered to securitizations with statutory audits, administrative support, accounting memos and financial reporting solutions

General overview of Securitization

Oliver Cloess Directeur Associé - Financial Services, Securitization Leader+352 42 124 [email protected]

Jaffer Ahsan Senior Manager - Financial Services, Securitization Coordinator+352 42 124 [email protected]

The difference?• European Securitization, including STS securitization is based on

transfer of credit risk and tranching of issued securities.• Luxembourg is neither based on transfer of credit risk nor

tranching• The Luxembourg definition is much broader

The consequence?• The Luxembourg definition allows and will continue to

allow tailor-made structured products benefitting from the Luxembourg environment.

Impact on the Luxembourg market?• European Style securitization:

Accelerated Growth. Pushed through securitization harmonization and STS Regulation.

• Tailor-made structured products: Continued Growth. Uninterrupted throughout financial crisis.

Luxembourg Securitization

European Securitization

European STS Securitization

How is PSD2 impacting your activity?All you need to know about the revised directive


Key aspects of PSD2 include:• Extension of regulated transactions: scope of regulated

transaction has been extended to transactions in any currency and one leg out transactions.

• Stricter customer authentication: payment service providers (PSPs) are obliged to ensure a stricter customer authentication every time the payer accesses his payment account online or performs any other action through remote channels.

• Internal dispute resolution: execution and application of adequate complaint resolution procedures setting out maximum processing time of 15 days.

• Payment initiation services: PSD2 will regulate payment initiation service providers (PISPs) and the initiation of payments. In this context, PSPs are obliged to provide secure communication facilities, inform PISPs about payment initiation, and treat all initiated payments equally.

• Account information services (AIS): access to the payment service user’s account has to be granted to third party providers for account information aggregation services. PSD2 regulates the duties of the account information service providers and those of the PSPs.

Other aspects also include:• Replacement of lost or stolen payment instruments only at

attributable costs.• Reduction of maximum liability for payer in case unauthorized

transaction.• Extension of registration requirements for PSPs (higher

governance efforts).

EY point of view

Our research in the financial sector suggests that most financial institutions consider the Regulation of access to accounts (XS2A) to be the critical aspect of the PSD2 in terms of expected implementation efforts, business as well as technical impacts and risk mitigation efforts that have to be borne by account servicing PSPs. The provision of a regulated access to a payer’s account for payment initiation services (PIS) and AIS offers opportunities for established and new market participants to improve, enlarge, or even re-engineer current product and service offerings.

The XS2A represents threats to existing market participants: • New market entrants (not being stuck to existing IT

infrastructures and architectural or technical restrictions) • Perceived increased security risks • Data protection regulation and requirements • Perceived increased fraud risks • Liability in case of unauthorized transactions and data breaches

The XS2A represents aspects of the PSD2 with the biggest impact on business, IT, risk and compliance departments and on the future digitization, product and services strategy of PSPs. Immediate action on the market participants’ strategy regarding XS2A is essential and should be balanced with other regulatory (e.g., Payment Accounts Directive, Interchange Fee Directive, fourth Anti-money Laundering Directive) and market initiatives (e.g., instant payments, block chain).

Access to account (XS2A) PIS and AIS

Customer authentification

The revised Directive on Payment Services (PSD2) was adopted by the European Parliament and published in the Official Journal on 23 December 2015. Member States will have until 13 January 2018 to implement the revised directive into national law. The PSD2 aims at enhancing consumer protection, promoting innovation and improving the security of payment services within the EEA7. It also introduces new concepts such as access to accounts with key impacts on the current processes and infrastructures.ency of reuse of financial instruments received under a collateral agreement.

7 European Economic Area, composed of European Union (EU) Member States plus Iceland, Liechtenstein and Norway



EY Solutions

EY Luxembourg has a strong track record with leading global and local PSPs and a deep understanding of the complex range of factors which will enable informed decisions on all aspects related to your future payments strategy. Through our extensive payment service industry expertise, we are ideally positioned to support you with:• The definition of a robust and future-oriented payments strategy

that caters for both, regulatory compliance with PSD2 and exploration of new markets

• The transition of the defined strategy into your target operating model

• The implementation of the set out payments strategy

Our significant knowledge around the payment services industry and its regulators will be a decisive factor in driving progress and minimizing delivery risk towards the deadline of the PSD2 implementation (December 2017) offering you:• A multi-disciplinary and multi-lingual team based in different

European markets that can work collaboratively with your team wherever needed

• Access to deep expertise on local, European and international payment markets, both digital and traditional

• Perspectives on digitization in the payment service industry• A track record of delivering successful payment operating model

change and cross border implementations as an independent advisor

• A proven, flexible approach to deliver your expectations for your PSD2 project

EY Luxembourg’s dedicated team includes payment experts who have ensured compliance of local, European and international PSPs with the Payment Services Directive as well as with Single Euro Payments Area (SEPA) regulations. The team is keen to continue the journey towards a more sophisticated market practice with you and hope that our ideas demonstrate our commitment to continuing our partnership with the payment service industry.

Payment initiation services Account information services• �Initiation of payments (credit

transfers) by means of the IT infrastructure/applications of a third party provider

• Explicit payer’s consent to initiation of payment required

• Initiation of retrieval of payment account information relevant to the payer by means of a third party provider application

• Explicit account holder’s consent required

Common to both services Common to both services

• Applicable to payment accounts accessible online• No dependence on a contractual relationship between PISP and

account servicing payment service provider

Patrice FritschDirecteur Associé - EMEIA Leader, Customer Tax Reporting Platform+352 42 124 [email protected]

Operations • Operating model

analysis

• Target operating model and customer experience design

• Fee schedule analysis and update

• Business process redesign

Risk & Compliance • Compliance/controls • Client communication • Account agreements and

Third party agreements amendements

• Client reimbursement

Analytics & Data • Data management

strategy & architecture • Customer data analytics • Fee and cost

management

• Data governance & data quality

Technology • Architecture/application

assessment & design • Technology vendor

assessment/selection • Solution architecture/

integration planning • Solution enablement

Become compliant with

PSD2 requirements

Consumer protection • Obligation to inform on

payment initiation service fees

• Liability with regard to unauthorized transactions

• Refund right with regard to SDD

Transparency • Central access point for

payment services at EBA (information on registered payment services of PSP)

Access to infrastructure • Regulation of payment

initiation services (provider)

• Regulation of account information services (provider)

Scope • Geographical & currency

extension • regarding regulated transactions • Inclusion of third party providers • Clarification and extension of def.

Complaints management • Standardization of

internal complaints management processes

• Deadlines for complaints resolution

Security • Security requirements

(network and information security directive)

• Security mechanism and stricter consumer authentication

• Reporting of security incidents (EBA)

PSD 2

Figure: EY services and solutions

Figure: New provisions of PSD2 versus. PSD1

EU audit reform: how audit committees can prepare for performance monitoring?How to guide our clients to success

Impact to the industry The new European Union (EU) audit legislation requires: • PIEs to mandatory rotate their statutory auditor and to restrict

the NAS they can obtain from their auditor • EU competent authorities to monitor the performance of PIEs’

audit committees (AC) and to disclose the results in three-yearly reports, starting from 2016

Luxembourg’s Commission of the Supervision of the Financial Sector, the CSSF, must, among other things:• Evaluate PIE AC performance as part of audit market monitoring

reports • Establish a sanctions regime that is applicable to individual PIE

AC members, other directors, and the PIEs themselves (plus their external auditor) in the event of non-compliance of rotation rules, approval and capping of permitted NAS, employment of a former auditor for a key management or directorship position, procedure for the selection of statutory auditor(s) or audit firm(s) after the expiry of the maximum duration of audit mandates

Under the new regime, AC of PIEs shall inter alia:• Ensure the implementation of rotation rules of statutory

auditor(s) or audit firm(s) • Monitor the statutory audit of the annual and consolidated

accounts• Review and monitor the independence of the statutory auditor/

audit firm compliant with local laws, and in particular the appropriateness of the provision of NAS

• Inform the administrative/supervisory body of the outcome of the audit and the AC role therein

EY point of view

At present, there is very little detail around how the competent authorities will assess the performance of AC of a PIE. However, they want to understand how AC work, how tendering is being carried out, which criteria are being used to select auditors, how rotation is affecting audit quality. Accordingly, the first question for AC to consider is whether their company is an EU PIE or has EU PIE(s) in its group.

The Luxembourg Law on the audit profession defines a PIE as an entity governed by the law of a (Member State) MS of the EEA, whose transferable securities are admitted to trading on a regulated market of an EEA MS, credit institutions, re-/insurance undertakings with the exception of pension funds and captive companies.

The EU PIE definition applies to individual entities. There are no separate rules for groups of companies. Many large multinational groups are likely to have more than one PIE in different countries in the EU. These groups will face the need to follow potentially different laws as a result of options left by the EU Directive and Regulation to national legislators, meaning, multinational companies headquartered outside the EU need to be aware of the requirements, as they may apply to some of their EU subsidiaries.

Auditor rotation Independence Sanctions

In June 2016, the European Directive 2014/56/EU on statutory audits of annual accounts and consolidated accounts entered into force, together with EU Regulation No. 537/2014 imposing, inter alia, mandatory audit firm rotation and significant restrictions on non-audit services (NAS) for public interest entities (PIEs) in the EEA8. In July 2016, Luxembourg transposed the Directive and implemented the Regulation into its corporate law.

8 European Economic Area, composed of European Union (EU) Member States plus Iceland, Liechtenstein and Norway



Bernard LhoestPartner - Banking & Capital Markets Leader+352 42 124 8341 [email protected]

Sylvie TestaPartner, Quality Risk Management Practice Leader+352 42 124 [email protected]

EY Solutions

How audit committees can prepare for performance monitoring?

We now explore how AC can improve their general performance while certifying their organizations comply with the new requirements. • Manage the audit tender process by following the rules in their

jurisdiction e.g., time frames and specific rules that apply to their PIE and its different subsidiaries

• Follow a fair and transparent process when selecting a new auditor e.g., tender documents should set out the transparent and nondiscriminatory selection criteria that the entity will use when evaluating the proposals of different audit firms

• Monitor the auditor’s independence of PIEs. Auditors of PIE are subject to a 70% cap of non-audit fees based on a consecutive three-year rolling average for services provided to a PIE, its parent undertaking or its controlled undertakings (irrespective of PIE status and of location). AC will need to make strategic decisions about which NAS they wish to receive, and when, from the audit firms in the different jurisdictions in which they either have a PIE or a parent or controlled undertaking of a PIE in the EU. PIEs need to strengthen their worldwide policies and procedures for approving NAS and also need to establish a monitoring process so that the 70% cap is not breached (i.e., for a 31 December year-end PIE, first financial year to count towards the cap calculation would be the year ending 2017.)

• Determine whether the AC is composed of the people with the right skills i.e., competence relevant to the sector in which the PIE operates. All members must be nonexecutive directors, with the majority also being independent. AC need to assess how many of their members would be viewed as independent by the audit oversight body in their jurisdiction. If a committee includes former partners from their incumbent auditor, these partners may be caught by cooling off rules and would therefore not be considered independent

• Review the quality of the audit: AC should actively engage with their entity’s auditor to find out what it is doing to improve the quality of the audit — whether that entails using new technology, applying new methods or bringing in specialist technical expertise to focus on certain aspects of the engagement

• Conduct a self-assessment which covers the committee’s performance with regard to monitoring the integrity of the financial statements, reviewing internal financial controls, assessing the effectiveness of the internal audit function and managing the relationship with the independent auditor

• Collaboration with regulators to understand what is expected of them and their PIE under the new legislation e.g.,:• Based on the results of their audit firm inspections• Whether their entity should make additional disclosures• Guidance on good audit committee practices• Summarize the activities they have undertaken• To share leading practices

Questions for the audit committee to consider

• Is the audit committee familiar with the auditor rotation requirements in its jurisdiction?• Does the audit committee have processes in place to monitor how much its PIE and its subsidiaries spend on non-audit services

provided by its independent auditor?• Does the audit committee need to undertake a self-assessment to review its effectiveness and check whether it complies with the

new rules on independence, sector competence, and accounting and auditing expertise?• Has the audit committee reviewed the audit inspection report for its independent auditor and raised any findings that caused

concern?• Does the audit committee have an open dialogue with the audit oversight body in its jurisdiction? If not, how could it start one?

Wealth Management. Could your clients’ needs be your competitive advantage?How should wealth managers prepare to grow through this period of rapid change?


Amid concerns about a potential slowdown in the global economy, wealth managers continue to be challenged by margin pressures and regulatory concerns.

EY’s research and analysis9 show there are significant amounts of assets in play globally. The vast majority (73%) of wealth management clients have relationships with multiple wealth managers, and 57% of them are open to consolidating, meaning four out of every ten clients would consolidate their assets into fewer firms under the right circumstances.

Estimating conservatively, there is a US$175b to US$200b revenue opportunity for the firms that get ahead of the curve and use client experience as a competitive advantage. Wealth managers that take bold action now rather than rely on a wait-and-see approach will be in a prime position to capitalize on the opportunities presented by this changing environment.

EY point of view

EY’s analysis of clients and their expectations highlights three essential elements: performance, engagement and trust which complement each other to form a comprehensive client experience model best suited for managing clients’ wealth.

However, there are three areas where wealth managers are out of step with clients: transparency, channels and role of the advisor. Clients redefine transparency: clients overwhelmingly identified transparency of portfolio performance and fees as the top driver of trust. But, clients push and are eager for a new level of public transparency. They want to rate advisors and connect with clients alike in public forums. Traditional views of transparency are no longer enough.

Digital channels – clients’ expectation: wealth managers that have been first movers in digital innovation and engagement are already moving a majority of service functions to digital channels, while asserting that they will keep core wealth advice activities in face-to-face channels. However, clients are significantly more open than firms to adopting digital channels for wealth advice and consider digital to be a primary channel for both advice and service.

Wealth advisor’s role to change: historically, wealth advisors have been the rock that keeps clients steady through market turbulence and personal life changes. Clients start questioning the value of this role and relationship.

Transparency Digital Advisor

The wealth management industry is experiencing unprecedented change as major shifts in client demographics present new demands. FinTech entrants are commoditizing the traditional advice model, which is eroding pricing power and also raising the bar for better and faster service. Wealth managers face significant opportunities to acquire new clients and assets, as well as daunting risks in retaining clients in the face of competitive threats and disruption.

9 For further information, please refer to the EY survey Could your client’s needs be your competitive advantage? The experience factor: the new growth engine in wealth management which is available on our homepage www.ey.com/Publication



EY Solutions

EY’s disruptive methodology: BIG. 13 weeks for a client experience blueprint.

In a world of disruption and constant acceleration, EY Luxembourg propose to adopt a disruptive method which allows you to redesign client experience in a digital world. The breakthrough innovation group (BIG) approach helps you shape your digital client experience in just 13 weeks.

Implementing your blueprint: setting up a MVP (Minimum Viable Product) factory.

EY helps you deliver tangible results through the set-up of an MVP factory. The MVP is the prototype of an actual application which you can already take to market and test with your clients using agile methodologies. You will then be able to repeatedly improve your offering and client experience.

To achieve this, EY Luxembourg’s dedicated team combine multiple skills: design thinking, technological skills, and industry knowledge that adopt a lean start up approach to inject dynamism into your organization.

Olivier Maréchal Partner - Luxembourg FSO Advisory Leader +352 42 124 8948 [email protected]

Denis CostermansDirecteur Associé - Advisory+352 42 124 [email protected]

Page 2 © 2016 Property of d'Ernst & Young Advisory - Confidential

Introduction of the RAIF – The Luxembourg AI vehicle of choice? Luxembourg has introduced a new type of alternative investment (AI) fund (AIF) which fosters the Grand Duchy’s industry leading position as EU-domicile of choice for AI funds.


The new RAIF regime completes the Grand-Duchy’s tool box available to AI initiators and can be understood as a hybrid between the well-established Luxembourg AI vehicles SIF10 and SICAR11 with the major difference that the RAIF is not subject to any kind of direct supervision or oversight by the CSSF, or any other Luxembourg supervisory authority. Only AIFs within the meaning of the alternative investment fund managers directive (AIFMD) can be organized under the RAIF regime and must be managed by an authorized external alternative investment fund manager (AIFM) established in Luxembourg or another country of the European Union (EU).

Since there is no direct supervision at the level of the RAIF, its time-to-market is significantly improved over the traditional regulated AIF structures SIF and SICAR.

With regard to its legal and operational structuring, the RAIF combines all the advantages of SIF and SICAR: it can adopt any type of legal form with either variable or fixed capital. RAIFs avail of the umbrella structure and grant herewith enhanced flexibility compared to the so-far existent Luxembourg non-regulated funds, i.e., the unregulated limited partnerships.

EY point of view

Luxembourg remains an innovation course attracting AI players and the introduction of the RAIF adds proof to its continued focus on the AI industry. The RAIF complements the Luxembourg AI toolbox and provides a flexible solution under the AIFMD regulations. Its advantages are numerous: • Flexibility since the RAIF combines all the advantages of both SIF

and SICAR• Time to market since no direct supervision at product level• Umbrella which allows the launch of ring-fenced sub-funds• Tax efficiency according to either the SIF or the SICAR tax

regime with value added tax (VAT) exemption on management services

• Cost efficiency via structuring and operational efficiency• Marketability through AIFM’s EU passport which is a major

benefit in reaching professional investors across Europe

New AI vehicleEnhanced

operational efficiency

Improved time-to-market

On 1 August 2016, the new Luxembourg Law on Reserved Alternative Investment Funds (the RAIF Law) entered into force introducing a new and innovative AI vehicle: The RAIF (or FIAR: fonds d’investissement alternative réservé) will be the vehicle of choice for those looking to achieve enhanced structuring and operational efficiency under the roof of the AIFMD while benefiting from a significantly reduced time-to-market.

10 Specialized investment fund11 Investment company in risk capital



Olivier Coekelbergs Partner - Private Equity Leader+352 42 124 [email protected]

Carmen von Nell-Breuning Associate Director - Private Equity Business Development+352 42 124 [email protected]

EY Solutions

Product launch:

Commercial designTalking through the commercial design of your AI structure with the EY team will give you the confidence that the specifications in your term sheet are integrated and complete, aligned with target investors needs and practical from an operational point of view.

Tax and regulatory structuringInteraction with our tax and structuring experts will ensure that the appropriate regulatory framework is selected based on the commercial design of the product. We will also help you establish and build a stable and tax neutral structure that best fits investor needs over the life of your AI structure.

Financial frameworksInvestors are increasingly demanding in terms of reporting to them and adherence to industry best practices. At the same time there is a balance to strike with the cost of complex reporting. Our team guides you through the design of an appropriate financial framework, including Net Asset Value (NAV) calculations, methods of asset valuation and other key judgments and estimates, and the disclosure of information to regulators.

Design operations Whether using your existing operational platform or creating one from scratch, our team supports you in the smooth launch of your product.

Risk management, governance and controlsWhether you are an investor, manager or board member, with an ever increasing focus on formalized risk, governance and control frameworks by investors and regulators, our specialist team helps you keep ahead of the game.

Ongoing operations:

During the lifetime of your AI structure, a well-balanced and efficient operating platform is essential. Through our audit relationship or as the focus of separate advisory mandates, we look forward to help you:• Prepare accurate and complete world class investor reports• Comply at all times with tax and regulatory frameworks• Better monitor and react to a constantly changing risk

environment• Develop world class information for decision making• Optimize your deployment of IT infrastructure• Improve business process efficiency• Develop robust performance metrics and benchmark against

peers

GDPR – why take the risk and be sanctioned? Less than two years to go until the new European data protection reform shall be binding and applicable in May 2018. Companies need to start now identifying gaps and to implement remediation.


The GDPR will reinforce data protection rights of individuals, facilitate the free flow of personal data in the digital single market and reduce administrative burden. Companies applying the same data protection rules across the EU, regardless where the data is processed, will become reality. The reform is a game changer for companies, introducing more stringent compliance challenges.Companies are impacted on four levels: legal framework (compliance with data privacy requirements), business model, technology (selection of the right tools) and embedment of data privacy in the company from the start (at all levels).

The key changes proposed by the new provisions concern:• Fines of up to 4% of annual worldwide turnover (< €20m)• Expanded scope: any data controllers and processors target any

EEA citizens• Data protection officer: to be appointed if an organization

conducts large scale systematic monitoring or processes large amounts of sensitive personal data

• Companies must prove they are accountable by:• Establishing a culture of monitoring, reviewing and assessing

data processing procedures• Minimizing data processing and retention of data• Building in safeguards to data processing activities• Documenting data processing policies, procedures and op-

erations that must be made available to the data protection supervisory authority on request

• Implementation of Privacy impact assessments

EY point of view

Market players will now have less than two years to prepare for the new data protection rules. Findings from the joint IAPP-EY Annual Privacy Governance Report 201615 indicated that fifty percent of all companies surveyed reported an intention to invest in privacy training as a direct result of the GDPR, 35 percent are increasing their privacy budget, and 34 percent are increasing staffing.

The industry will need to increase their focus on data protection compliance given the stringent requirements of the GDPR and the potential fines.

Preparatory measures for companies include a clear understanding of their current compliance position and their personal data processing by verifying what personal data they process, where it is processed in the company and where the data is transferred from and to and how it is secured throughout its lifecycle. With an understanding of their compliance gaps, market participants will be in a position to assess their personal data risks and develop prioritized remediation plans in order to adjust their data protection management to the new landscape under the GDPR.

Accountability Inventory Personal data

In May 2016, the reform of the European Union (EU) data protection rules, composed of the Directive 2016/68012 and Regulation 2016/67913, entered into force. Member States have to transpose the Directive by 6 May 2018 whereas the Regulation will be applicable from 25 May 2018 by repealing Directive 95/46/EC14 on the same day. One pan-European law for data protection, replaces the current inconsistent patchwork of national laws and companies will now deal with one single supervisory authority.



Olivier MaréchalPartner - Financial Services Advisory Leader+352 42 124 [email protected]

Francois Barret Senior Manager - FSO IT Security Leader+352 42 124 8547 [email protected]

EY Solutions

Market players will face many challenges preparing for the EU GDPR over the next 18 months. It is important that they understand their current state and the steps necessary to move towards compliance with the EU GDPR.

EY has a dedicated team of certified information privacy professionals who help organizations to better understand what risks exist to data privacy and compliance with the GDPR and the regulations involved while helping them effectively manage the use of personal information within their organization. We can help you deliver and run privacy improvement programs leveraging our senior stakeholder management expertise, privacy framework, mature tools, methodologies and flexible resourcing models through our Privacy Transformation Program demonstrated below:

12 Directive (EU) 2016/680 of the European Parliament and of the Council of 27 April 2016 on the protection of natural persons with regard to the processing of personal data by competent authorities for the purposes of the prevention, investigation, detection or prosecution of criminal offences or the execution of criminal penalties, and on the free movement of such data, and repealing Council Framework Decision 2008/977/JHA

13 Regulation (EU) 2016/679 of the European Parliament and of the Council of 27 April 2016 on the protection of natural persons with regard to the processing of personal data and on the free movement of such data, and repealing Directive 95/46/EC (General Data Protection Regulation, GDPR) (The text is relevant in i.e., European Union Member States and Iceland, Liechtenstein and Norway, EEA).

14 Directive 95/46/EC of the European Parliament and of the Council of 24 October 1995 on the protection of individuals with regard to the processing of personal data and on the free movement of such data15 For further information, the whole document can be downloaded on our webpage www.ey.com.

Overview Service provided Solution

Privacy Impact Assessment

Data protection improvement programme

GDPR ‘360 Degree’ Assessment

Detailed assessment of data protection maturity

Programme implementation

Compliance and monitoring solutions

Customised Privacy Impact Assessment

Programme design

Risk assessment and maturity evaluation based on industry framework and EU General Data Protection Regulation Recommendations and roadmap for remediation Product and process-specific risks

Personal Data Flow Mapping Personal Information

flow documentation

Personal information inventory Use of the Exonar Raven tool to identify and document a sample of

the personal data you have in your organisation, where it is, where is transferred from/to, who has access to it Process or system specific personal information flow diagrams and documentation

Design and delivery of data protection improvement programmes, including the development and implementation of:

Data protection frameworks Privacy governance and organisation design Policy and procedures Training and awareness Incident management Third Party management Risk management Procedures and controls Information security controls Binding Corporate Rules program compliance Ongoing compliance and monitoring

Assessment of your systems or projects identifying key data protection risks

Legal Support

Legal analysis, validation and drafting of documents

Legal analysis of compliance with data protection legislation

GDPR Speed Assessment

High level assessment of data protection maturity

Targeted assessment gauging readiness for the new requirements of the GDPR

Ongoing Programme support

Customer Tax Reporting

A global changing regulatory environment as well as increased client demands in relation to reporting and transparency have brought private client tax services into sharp focus.

Customer Tax Reporting is becoming increasingly important, driven by customer demand and regulatory influences. Many financial institutions are now focusing their attention on this area, taking a fresh look at personal tax services and how they link in with the wider customer experience, especially for high net worth and ultra-high net worth customers, along with looking at ways to enhance the overall customer experience by reducing risk, managing quality and costs.

Our Customer Tax Reporting Services

EY is integrated globally, providing the platform for provision of multi-jurisdictional tax reporting providing a range of recognizable and distinguished services relevant for universal banks, private banks and wealth managers in order to develop their client services and retain their clients. These services include: • Quality assurance: Review of existing processes and outputs to

provide independent assurance of the accuracy and suitability of reports prior to sending them to clients

• Process improvement: Transformation of end to end processes, and assistance with implementation of automated software including PMO, multi-country tax expertise and advice around QA processes

• Outsourcing: Full scope outsourcing of client reporting, including bulk processing of large scale requirements and manual processing of complex HNWIs.

Our additional business services integrated with tax services can support you as a one stop shop solution for the services that the bank needs to support its private clients.


EY capability and team

• We offer end to end processing of tax reporting production via a robust platform covering multiple jurisdictions

• We are a multidisciplinary firm able to combine an industrialized production approach with tax expertise

• We have strong access to local markets and relations with banks and various industry associations

• We deliver cross border and multi-jurisdiction personal tax advisory

• EY Global Wealth Group encompasses Luxembourg and other European countries’ centres of excellence

Our platform is one of the most recent and flexible business process outsourcing platforms based on a robust and flexible computation engine used to produce more than 100,000 tax reports per year.

Regu

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ient

dem

and

and

need

s

• Increased focus by G20 on tax transparency and tax avoidance

• Increasing regulatory burden on financial institutions to gather sufficient information and report or apply client tax information to tax authorities (e.g., CRS, FATCA, QI, EUSD, Flat-tax agreements)

• OECD and tax authorities’ focus on HNW/international taxpayers and tightening disclosure regimes

• More dynamic customer interfaces and development of online/mobile propositions

• A differentiated tax service that provides accessible, useful and correct tax information

• Request of a document that details qualification of revenues in line with local tax rules in order to ease tax declaration duties

Driv

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utur

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ange

Our

resp

onse

Quality assuranceReview of existing processes and outputs to provide independent assurance of the accuracy and suitability of reports prior to sending them to clients

Manual ProcessingManual calculation for complex investment products which cannot be automated on client’s system. Also, for HNWI or UHNWI who have complex and multi-country portfolios or bespoke service requirements

Process improvement and in-sourcingTransformation of end to end processes, and assistance with in-sourced implementation of automated software including PMO, multi-country tax expertise and advice around QA processes

Outsourcing Full scope outsourcing of client reporting, including bulk processing of large scale requirements and manual processing of complex HNWIs

Multi-country reportingCurrently many banks and asset managers provide only a generic report but want to provide reports tailored to the tax rules for customers who are tax residents in foreign countries

Complex investment products and individualsOften banks and asset managers cannot accurately compute gains on simple and/or complex products (difficult to automate, or no in-house resources), or do not want to acquire tax and system knowledge

Customized mass production tax reportingPrivate Banks are seeking to provide tax reports to all of their customers and therefore need to produce large volumes in short timeframes

Automated bulk processing for Private Banks and Wealth BusinessesBulk processing enables costs to be minimized and scaled to production volumes

EY is integrated globally, providing the platform for provision of multi-jurisdictional tax reporting

EY has the required tax expertise to follow-up local legislations for multiple countries and test tax reporting rules of the reporting platform

EY has the automated solutions to support mass production by taking into account tax residency and qualification of revenues in the domicile of the beneficiary. The reports are customized in the Bank marketing layouts and specific required communications

Patrice FritschDirecteur Associé - EMEIA Leader Customer Tax Reporting Platform

+352 42 124 [email protected]

Olivier MaréchalPartner - Financial Services

Advisory Leader+352 42 124 8948

[email protected]


EY GFD 2.0

Keep up with the pace with EY’s Global Fund Distribution Services - EY GFD, for cross-border distribution of UCITS, AIFs and other CISEY GFD refers to a set of innovative services developed by EY to help asset managers with the cross-border distribution and registration of their UCITS, AIFs and other CIS. It covers all key distribution markets in Europe, Asia, Latin America, Africa and the Middle East.• Interactive market analytics• Market intelligence product• Fund reporting• Fund registration

All EY GFD services are accessible through the EY GFD dedicated web platform ey.com/GFD.

We will share with members information related to EY Global Fund Distribution on our Linkedin group EY GFD - Global Fund Distribution.

Global Fund Distribution

Our GFD posters

Download the poster from ey.com/GFD

Will the wind take you to the East?Asia-Pacific fund distribution March 2016EY GFD - EY’s global services for cross-border distribution of UCITS, AIFs and other CIS

In or out? European fund distribution September 2016

EY GFD — EY’s global services for cross-border distribution of UCITS, AIFs and other CIS

How wide is your horizon?EY’s global services for cross-border distribution of UCITS, AIFs and other CIS

Global fund distribution June 2016

European fund distribution - September 2016

Open-ended investment fund strategies - November 2016

Global fund distribution - June 2016

Asia-Pacific fund distribution - March 2016

If you have the right satellites, do you still need a core strategy?Open-ended investment fund Strategies – November 2016

EY GFD — EY’s global services for cross-border distribution of UCITS, AIFs and other CIS

Open-ended investment fund managers - February 2016

Updated version


Our GFD services Your GFD contacts

Interactive market analyticsAn interactive, dynamic and visual web-based business intelligence engine to define and challenge your fund product developments and distribution strategies across 40 countries.

Market intelligence productProvides you with country-based market and regulatory intelligence responding to essential concerns you may have regarding investors’ appetite for foreign funds, your distribution strategy, how to register your funds step-by-step and how to cope with local reporting and maintenance requirements.

Fund registrationHelps you perform and monitor the effective registration and maintenance of your UCITS, AIFs and other CIS in each targeted jurisdiction, through our dedicated client-focused team with specialist distribution knowledge.

Fund reportingFund Tax Reporting Our Fund Tax Reporting Services provides you with a streamlined fund reporting process using a time- and cost-saving model, allowing you to enhance risk management and oversight with regard to fund reporting obligations in various jurisdictions.

Fund ReportingOur Fund Reporting Services provides you with an automated solution dedicated to the preparation of financial statements for all types of investment funds and related companies in various jurisdictions.

Rafael AguileraDirecteur Associé EMEIA Wealth & Asset Management Product Strategy and Distribution Leader+352 42 124 [email protected]

Laurent DenayerPartner Global Fund Distribution Leader and Financial Services Risk Management Leader +352 42 124 [email protected]

Maria SchererDirecteur Associé Financial Services, Tax Reporting+352 42 124 [email protected]

Sebastien FournyMarket Facing Director Financial Accounting, Advisory & Reporting Services (FAAS/ACR)+352 42 124 [email protected]


Join our LinkedIn groups to get the latest information from our experts and share with them your insight on the latest topics.

Follow us on Twitter to get our latest EY Luxembourg news

Visit our Luxembourg website to get all the information about EY Luxembourg and download our latest publications

Investment funds in Luxembourg – A technical guide September 2016

The purpose of this technical guide is to provide, in a clear and concise format, an introduction to Luxembourg as a center for investment funds.

European private debt: where do we go?

This paper summarizes the outcome of a roundtable held in the EY Luxembourg AIF Club and pays attention to the current private debt market in Luxembourg.

All you need to know about the Reserved Alternative Investment Fund

On 14 July 2016, the Luxembourg Parliament adopted the bill No. 6929 which introduces a new type of alternative investment fund in Luxembourg: the reserved alternative investment fund.

What do you need to know about social and environmental information reporting?

The birth of the Luxembourg Law on disclosures of non-financial and diversity information.

Audit reform in Luxembourg – what role will the Audit Committee play?

The Law of 23 July 2016 on the audit profession transposing European Directive 2014/56/EU and implementing European Regulation No. 537/2014.

EY Luxembourg AIF Club

EY TAX Club (Luxembourg)

EY Private Equity Luxembourg

EY GFD - Global Fund Distribution

@EY_Luxembourg

ey.com/lu

Connect with us

All you need to know about the Reserved Alternative Investment Fund (RAIF)

EY | Assurance | Tax | Transactions | Advisory

About EYEY is a global leader in assurance, tax, transaction and advisory services. The insights and quality services we deliver help build trust and confidence in the capital markets and in economies the world over. We develop outstanding leaders who team to deliver on our promises to all of our stakeholders. In so doing, we play a critical role in building a better working world for our people, for our clients and for our communities.

EY refers to the global organization, and may refer to one or more, of the member firms of Ernst & Young Global Limited, each of which is a separate legal entity. Ernst & Young Global Limited, a UK company limited by guarantee, does not provide services to clients. For more information about our organization, please visit ey.com.

© 2016 Ernst & Young S.A.All Rights Reserved.

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This material has been prepared for general informational purposes only and is not intended to be relied upon as accounting, tax, or other professional advice. Please refer to your advisors for specific advice.

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The “RAIF Law” – 14 July 2016

On 14 July 2016, the Luxembourg Parliament adopted the bill n°6929 which introduces a new type of alternative investment fund in Luxembourg: the reserved alternative investment fund (RAIF – or fonds d’investissement alternative réservé, FIAR).

This law has been published in the Luxembourg official gazette, the Mémorial A, on 28 July 2016.

• Luxembourg’s fund regulation and supervision is structured at the level of the fund, such as the UCITS, Part II UCI , SIF and SICAR (“product regulation”)

• The AIFM Directive introduced the regulation and supervision at the level of the manager, the AIFM (“Manager regulator”)

• The new RAIF will enable investors to fully comply with and benefit from the AIFM Directive while at the same time avoiding a double supervision because the RAIF is not subject to direct supervision as well as benefiting from all the classic advantages of a Luxembourg SIF or SICAR

Contacts

Alain KinschCountry Managing PartnerEMEIA Private Equity Fund Leader+352 42 124 [email protected]

Olivier CoekelbergsPartner, Private Equity Leader+352 42 124 [email protected]

EY Private Equity Luxembourg

@EY_Luxembourg

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Michael HornsbyPartner, EMEIA Real Estate Funds Leader+352 42 124 [email protected]

Michael FergusonPartner, Luxembourg Asset Management and EMEIA Regulated Fund Practice Leader+352 42 124 [email protected]


Contacts

This publication is coordinated by Bernard Lhoest.

With thanks to Emily Ball and Anne Gronimus.

If you would like to receive future issues of this newsletter, please email: [email protected]

EY Luxembourg Financial Services

Alain KinschCountry Managing Partner

+352 42 124 8355 [email protected]

Bernard LhoestBanking & Capital Markets Leader


Michael FergusonWealth & Asset Management Leader


Olivier CoekelbergsPrivate Equity Leader


Michael HornsbyReal Estate Leader


Jean-Michel PacaudInsurance Leader


Olivier MaréchalFinancial Services Advisory Leader


Dietmar KlosFinancial Services Tax Leader


Rafael Aguilera +352 42 124 8365 [email protected] Bannier +352 42 124 8132 [email protected] Beavers +352 42 124 8846 [email protected] Bertrand +352 42 124 8845 [email protected] Braun +352 42 124 8800 [email protected] Brüne +352 42 124 8718 [email protected] Capolaghi +352 42 124 8855 [email protected] Clöss +352 42 124 8696 [email protected] Costermans +352 42 124 8949 [email protected] Cremer +352 42 124 8304 [email protected] Daws +352 42 124 7196 [email protected] Denayer +352 42 124 8340 [email protected] Dequaire +352 42 124 8346 [email protected] Di Bartolomeo +352 42 124 8493 [email protected]é Ensch +352 42 124 8373 [email protected] Faber +352 42 124 8706 [email protected] Feider +352 42 124 8797 [email protected] Fritsch +352 42 124 8950 [email protected] Galand +352 42 124 8683 [email protected] Haas +352 42 124 8305 [email protected] Hubaux +352 42 124 7588 [email protected] Jordant +352 42 124 8161 [email protected] Lambert +352 42 124 7361 [email protected] Linon +352 42 124 7342 [email protected] Lourenço Marques +352 42 124 7068 [email protected] Miller +352 42 124 7147 [email protected] Nesvedov +352 42 124 8789 [email protected] Nichol +352 42 124 8975 [email protected] Nicks +352 42 124 8347 [email protected] Orozco +352 42 124 8473 [email protected] Scherer +352 42 124 7279 [email protected] Testa +352 42 124 8775 [email protected] Vandendorpe +352 42 124 8049 [email protected] Vaucouleur +352 42 124 8951 [email protected] Volckrick +352 42 124 7014 [email protected] Wintgens +352 42 124 8402 [email protected]érard Zolt +352 42 124 8508 [email protected]


EY | Assurance | Tax | Transactions | Advisory

About EYEY is a global leader in assurance, tax, transaction and advisory services. The insights and quality services we deliver help build trust and confidence in the capital markets and in economies the world over. We develop outstanding leaders who team to deliver on our promises to all of our stakeholders. In so doing, we play a critical role in building a better working world for our people, for our clients and for our communities.

EY refers to the global organization, and may refer to one or more, of the member firms of Ernst & Young Global Limited, each of which is a separate legal entity. Ernst & Young Global Limited, a UK company limited by guarantee, does not provide services to clients. For more information about our organization, please visit ey.com.

© 2016 Ernst & Young S.A. All Rights Reserved.

ED none This material has been prepared for general informational purposes only and is not intended to be relied upon as accounting, tax, or other professional advice. Please refer to your advisors for specific advice.

www.ey.com/luxembourg

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