Key regulatory developments in the EU

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EU Banking and Finance Regulatory Newsletter January - May 2023
Key regulatory developments in the EU

Key regulatory developments in the EU

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May 31, 2023

Source/Date	Brief description
European Central Bank (ECB) May 23, 2023	ECB finalizes guide on qualifying holding assessments The ECB’s final guide clarifies supervisory practices for qualifying holding assessments and aims to support applicants in qualifying holding acquisitions, typically triggered by mergers and acquisitions projects. The guide also provides information on complex acquisition structures, the application of the principle of proportionality and specific procedural elements related to qualifying holding acquisitions. More information is available here.
European Supervisory Authorities (ESAs) April 25, 2023	ESAs call for vigilance in face of rising financial risks The three ESAs published their Spring 2023 Joint Committee Report on risks and vulnerabilities in the EU financial system. Despite the recent more positive growth forecasts and general belief that a deep recession is no longer on the horizon, they have concluded that the economic environment remains uncertain. Identified risks include a more protracted period of higher inflation, volatility in financial asset prices, and periodic tight market liquidity, which has also led to unexpectedly high margin calls for some market participants (e.g., as seen in energy derivatives markets in summer 2022). Overall, high uncertainty and fragile market liquidity limit the financial system’s resilience to further external shocks. Political uncertainty remains high at the global and regional level and continues to pose risks to financial institutions. Cybersecurity remains another area to monitor and address, as the number of sophisticated cyberattacks continues unabated and the Russian war in Ukraine continues. Finally, the collapses of several midsize US banks in March 2023 have put pressure on markets around the world and led to general tensions in other global financial markets. More information is available here and here.
European Insurance and Occupational Pensions Authority (EIOPA) April 24, 2023	EIOPA and ECB call for increased uptake of climate catastrophe insurance EIOPA and the ECB published a joint discussion paper on how to better insure households and business in the EU against climate-related natural catastrophes, such as floods or wildfires. The paper aims to increase the uptake and efficiency of climate catastrophe insurance while incentivizing adaption to and mitigation of climate risks. Currently, only a quarter of climate-related catastrophe losses in the EU are insured, and this gap is expected to widen as the impact of climate change grows. Lack of climate-catastrophe insurance can impact the economy and overall financial stability, as ordinary insurance does not cover such losses, and households and businesses cannot resume their activities as quickly, slowing economic recovery. The joint discussion paper is part of EIOPA’s sustainable finance agenda and work to improve the overall understanding of climate-related risk and aims to close the climate insurance protection gap. More information is available here.
European Banking Authority (EBA) April 24, 2023	EBA consults on guidance on benchmarking of diversity practices The EBA launched a consultation on guidelines for benchmarking diversity practices including diversity policies and gender pay gap under the Capital Requirements Directive (CRD) and the Investment Firms Directive (IFD). The guidelines will address the collection of data on diversity policies, diversity practices and the gender pay-gap at the level of the management body, apply to institutions and investment firms and provide templates and instructions for the collection of diversity data. They are intended to ensure that benchmarking covers a representative sample of institutions and investment firms in each member state and will help raise awareness of these issues among all stakeholders. More information is available here.
European Central Bank (ECB) April 21, 2023	ECB report: Banks must improve climate risk disclosures While banks have published more information on climate and environmental risks over the past year, the ECB report notes that the quality of their disclosures is still too low to meet upcoming supervisory standards. As a result, European banks must prepare to comply with stricter EU rules on climate and environmental risk disclosure, which take effect this year. The implementing technical standards (ITS) issued by the EBA on Pillar 3 disclosures—a set of reporting standards on environmental, social and governance risks—will apply to most significant banks in the euro area. More information is available here and here.
European Parliament April 20, 2023	Green light for new EU legislation on crypto assets The Parliament also gave the final green light to new common rules on the supervision, consumer protection and environmental safeguards of crypto assets, including crypto currencies (MiCAR). The draft law includes safeguards against market manipulation and financial crime and will cover crypto assets not regulated by existing financial services legislation. The main provisions for issuers and traders of crypto assets (including asset reference tokens and e-money tokens) relate to transparency, disclosure, authorization, and supervision of transactions. In addition, the new framework will support market integrity and financial stability through the regulation of public offerings of crypto assets. Finally, the agreed text includes measures against market manipulation and to prevent money laundering, terrorist financing and other criminal activities. To combat money-laundering risks, ESMA is expected to establish a public register listing those noncompliant crypto assets service providers operating in the EU without authorization. More information is available here and here.
European Parliament April 20, 2023	New standard to fight greenwashing in the bond markets EU negotiators agreed on the first standard for the issuing of green bonds. The European Green Bonds Standard (EUGBS), which companies issuing a bond can choose to comply with, will primarily allow investors to target their investments towards more sustainable technologies and businesses. It also gives companies issuing such bonds more certainty that they are suitable for investors looking to add green bonds in their portfolio. The standard is consistent with the more horizontal Taxonomy legislation that determines which economic activities can be considered as environmentally sustainable and, overall, intends to reduce greenwashing. More information is available here.
European Central Bank (ECB) April 18, 2023	ECB and SRB welcome legislative proposals for bank crisis management and deposit insurance framework The ECB and the Single Resolution Board (SRB) participated in the consultation process leading to the European Commission’s proposals for bank crisis management and deposit insurance framework. The framework includes both a clarification on the scope of application of a resolution in relation to national liquidation procedures and enhancements to the ESAs’ toolkit for managing bank failures in a way that effectively protects critical functions as well as citizens. Both institutions are willing to provide technical input to further improve the Commission’s proposals and ensure that the overall framework is consistent and workable. The proposed legislative changes are seen as an important and pragmatic step forward in terms of bank crisis management and deposit insurance. More information is available here.
European Supervisory Authorities (ESAs) April 12, 2023	ESAs propose amendments to extend and simplify sustainability disclosures The three ESAs published a consultation paper with amendments to the Delegated Regulation of the Sustainable Finance Disclosure Regulation (SFDR), proposing changes to the disclosure framework to address issues that have emerged since the introduction of SFDR, including various technical adjustments and simplifications. In addition, the amendments are expected to include an expansion of the list of universal social indicators for disclosing key principal adverse impacts of investment decisions, a refinement of the content of other indicators for principal adverse impacts, and the inclusion of product disclosures on decarbonization targets. More information is available here.
European Securities and Markets Authority (ESMA) March 30, 2023	ESMA provides guidance for supervision of copy trading services ESMA published a supervisory briefing on firms offering copy trading services, in accordance with its objective of fostering investor protection and actively promoting supervisory convergence across the EU. The briefing includes guidance on the qualification of copy trading services as an investment service and sets out supervisory expectations regarding various MiFID II requirements, such as information requirements, product governance, remuneration, etc. The briefing reflects the supervisory expectations of both ESMA and National Competent Authorities (NCAs) and also includes indicative questions that supervisors could ask themselves, or respective firms, when assessing the firms’ approaches to the application of the relevant MiFID II rules. More information is available here.
European Banking Authority (EBA) March 29, 2023	EBA consults on amendments to guidelines on risk-based AML/CFT supervision to include crypto asset service providers The EBA launched a public consultation on amendments to its guidelines on risk-based anti-money laundering and countering the financing of terrorism (AML/CFT) supervision. The proposed changes extend the scope of these guidelines to AML/CFT supervisory of crypto-asset service providers (CASPs) and include guidance on the sources of information competent authorities should consider when assessing ML/TF risks associated with CASPs. They also highlight the importance of a consistent approach to setting supervisory expectations in cases where multiple competent authorities are responsible for the supervision of the same institutions. More information is available here.
European Securities and Markets Authority (ESMA) March 27, 2023	ESMA updates its guidance on product governance ESMA published its final report on the MiFID II product governance guidelines. The product governance requirements introduced by MiFID II have proven to be one key element of the MiFID II investor protection framework aimed at ensuring that financial instruments and structured deposits (“products”) are only manufactured and/or distributed when this is in the best interest of clients. By aiming to ensure a consistent and harmonized application of the product governance requirements, the guidelines will ensure that the objectives of MiFID II can be efficiently achieved. More information is available here.
European Supervisory Authorities (ESAs) and European Central Bank (ECB) March 13, 2023	ESAs and ECB call for enhanced climate-related disclosure for structured finance products The three ESAs, together with the ECB, published a joint statement on climate-related disclosure for structured finance products. The statement encourages the development of disclosure standards for securitized assets through harmonized climate-related data requirements. Currently, there is a lack of climate-related data on assets underlying structured finance products. This poses an obstacle for the classification of products and services under the EU Taxonomy Regulation and Sustainable Finance Disclosure Regulation (SFDR) and hinders the proper assessment and management of climate-related risks. The statement outlines the joint efforts of the ECB and the ESAs to facilitate access to climate-related data to improve sustainability-related transparency in securitizations and to promote consistent and harmonized requirements for similar instruments. More information is available here.
European Banking Authority (EBA) February 21, 2023	EBA publishes final revised guidelines on methods for calculating contributions to deposit guarantee schemes (DGS) The EBA published revised guidelines on deposit guarantee schemes (DGS), which harmonize the methodology for the DGS to collect contributions from credit institutions in proportion to their riskiness, thereby further strengthening the link between the riskiness of a credit institution and how much it needs to contribute to the DGS funds that will be used to reimburse depositors in the event their bank fails. More information is available here.
European Banking Authority (EBA) February 13, 2023	EBA asks authorities to increase transparency on their approach to bail-in in case of banking failure The EBA published its final guidelines for resolution authorities on how to apply the bail-in mechanism—the main tool available to authorities to avoid using taxpayer money in the event a large bank fails. Transparency and predictability are central both to the credibility of the resolution framework and to ensuring investors’ protection. The guidelines seek to ensure that a minimum level of harmonized information is published on how authorities would effectively implement the write down and conversion of capital instruments and apply the bail-in tool (“exchange mechanic”). More information is available here.
European Insurance and Occupational Pensions Authority (EIOPA) February 7, 2023	EIOPA’s Risk Dashboard points to overall resilience in insurance sector despite high macro and market risks EIOPA published its Risk Dashboard based on Solvency II data from the third quarter of 2022, which summarizes the main risks and vulnerabilities of the EU insurance sector and is based on data collected from insurance groups and insurance undertakings. The results show that insurers’ exposures to macro and market risks are currently the insurance sector’s biggest concern. In particular, market risks are currently at high levels and remain a key source of concern amid a further decrease in global GDP growth. All other risks categories, such as profitability and solvency, climate as well as digitalization and cyber risks stay at medium levels. More information is available here and here.
European Insurance and Occupational Pensions Authority (EIOPA) February 3, 2023	EIOPA outlines approaches to strengthen oversight of third country governance arrangements EIOPA has published a supervisory statement to strengthen the supervision and monitoring of insurance undertakings’ and intermediaries’ activities when using governance arrangements in third countries. EIOPA has previously emphasized that EU-based undertakings or intermediaries should not resemble empty-shell companies without an appropriate level of corporate substance within the EU. But such governance arrangements that include third-country branches can lead to poor risk management, ineffective decision-making and pose operational, reputational and financial risks—also to policyholders. With this in mind EIOPA has clarified its supervisory expectations. More information is available here and here.
European Securities and Markets Authority (ESMA) February 1, 2023	ESMA reviews the scope of clearing and derivatives trading obligations ESMA published its final report on clearing (CO) and derivative trading (DTO) obligations to accompany the benchmark transition. The report includes proposals for draft Regulatory Technical Standards (RTS) amending the scope of the CO and DTO for over-the-counter (OTC) interest rate derivatives (IRD) denominated in EUR, GBP, JPY, and USD. The report is part of the transition from EONIA and LIBOR to alternative benchmarks—primarily Risk-Free Rates, such as €STR, SOFR, SONIA and TONA. ESMA’s proposed amendments aim to ensure a smooth benchmark transition while maintaining an effective scope for these obligations. More information is available here.
European Supervisory Authorities (ESAs) January 31, 2023	ESAs consult on draft guidelines on the exchange of information relevant to fit and proper assessments The three ESAs published a consultation paper on draft joint guidelines on the system for the exchange of information relevant to the assessment of the fitness and propriety of holders of qualifying holdings, directors, and key function holders of financial institutions by competent authorities. The guidelines aim to increase the efficiency of the information exchange between sectoral supervisors by harmonizing practices and clarifying how competent authorities should use the information system developed by the three ESAs. More information is available here.
European Securities and Markets Authority (ESMA) January 26, 2023	ESMA issues its first opinion on the draft European Sustainability Reporting Standards ESMA issued an opinion on the first draft of the European Sustainability Reporting Standards (ESRS Set 1), developed by the European Financial Reporting Advisory Group (EFRAG). ESMA finds that ESRS Set 1 broadly meets the objective of being conducive to investor protection and not undermining financial stability. ESMA’s opinion was drafted at the request of the European Commission and in accordance with the mandate set out in the Corporate Sustainability Reporting Directive (CSRD). As a next step, the Commission will now consider ESMA’s opinion together with opinions submitted by the EBA, EIOPA and other public bodies and adopt ESRS Set 1 into delegated acts by June 30, 2023. More information is available here.
European Supervisory Authorities (ESAs) January 26, 2023	ESAs issue their opinions on draft standards governing corporate sustainability disclosures (ESRS) EIOPA and the EBA have determined that the draft meets its objectives and is consistent with international standards and any other relevant EU Regulation. In particular, EIOPA welcomes the general approach on the materiality assessment and the mandatory disclosure requirements that are crucial for financial market participants to calculate and report their principle adverse impact indicators under the SFDR. In addition, the EBA very much welcomes the level of alignment with the Pillar 3 disclosure requirements reached at this stage. Nonetheless, EIOPA is of the opinion that more clarity is needed on the boundaries of the value chain for insurers and pension funds so that relevant material sustainability impacts may be reported in a proportionate and risk-based manner. More information is available here and here.
European Securities and Markets Authority (ESMA) January 25, 2023	ESMA and the UK FCA agree on the recognition of UK benchmark administrators in the EU ESMA and the UK Financial Conduct Authority (FCA) have agreed on a new Memorandum of Understanding (MoU) on the cooperation and the exchange of information in relation to benchmark administrators based in the UK. The MoU addresses benchmark administrators who seek recognition or are recognized in the EU and allows ESMA to recognize benchmarks administrators from the UK. Such an agreement with the relevant non-EU authority is required under the Benchmarks Regulation where a non-EU benchmark administrator seeking recognition in the EU is subject to supervision in its home country for ESMA to grant recognition to that non-EU administrator. More information is available here.
European Securities and Markets Authority (ESMA) January 17, 2023	Costs of retail investment products continue slow decline ESMA published its fifth annual report on the costs and performances of retail investment products in the EU between 2012 and 2021. The authority has found that the costs of investing in key retail financial products continue to decline, albeit very slowly. The costs and performance of retail investment products are key determinants of the benefits and risks faced by retail investors in the EU. Clear and comprehensive information on retail investment products can (i) help investors assess the past performance and costs of products offered across the EU and (ii) encourage retail participation in capital markets. ESMA’s report helps to monitor progress in this regard by providing consistent information across the EU on the costs and performance of retail investment products. It also demonstrates the importance of disclosing costs to investors, as required by the MiFID II, UCITS and PRIIPs regulations, and the need for asset managers and investment firms to act in the best interest of investors, particularly given their role in manufacturing and distributing investment products. More information is available here.

Source/Date

Brief description

European Central Bank (ECB)

May 23, 2023

ECB finalizes guide on qualifying holding assessments

The ECB’s final guide clarifies supervisory practices for qualifying holding assessments and aims to support applicants in qualifying holding acquisitions, typically triggered by mergers and acquisitions projects. The guide also provides information on complex acquisition structures, the application of the principle of proportionality and specific procedural elements related to qualifying holding acquisitions.

More information is available here.

European Supervisory Authorities (ESAs)

April 25, 2023

ESAs call for vigilance in face of rising financial risks

The three ESAs published their Spring 2023 Joint Committee Report on risks and vulnerabilities in the EU financial system. Despite the recent more positive growth forecasts and general belief that a deep recession is no longer on the horizon, they have concluded that the economic environment remains uncertain. Identified risks include a more protracted period of higher inflation, volatility in financial asset prices, and periodic tight market liquidity, which has also led to unexpectedly high margin calls for some market participants (e.g., as seen in energy derivatives markets in summer 2022).

Overall, high uncertainty and fragile market liquidity limit the financial system’s resilience to further external shocks. Political uncertainty remains high at the global and regional level and continues to pose risks to financial institutions. Cybersecurity remains another area to monitor and address, as the number of sophisticated cyberattacks continues unabated and the Russian war in Ukraine continues.

Finally, the collapses of several midsize US banks in March 2023 have put pressure on markets around the world and led to general tensions in other global financial markets.

More information is available here and here.

European Insurance and Occupational Pensions Authority (EIOPA)

April 24, 2023

EIOPA and ECB call for increased uptake of climate catastrophe insurance

EIOPA and the ECB published a joint discussion paper on how to better insure households and business in the EU against climate-related natural catastrophes, such as floods or wildfires. The paper aims to increase the uptake and efficiency of climate catastrophe insurance while incentivizing adaption to and mitigation of climate risks. Currently, only a quarter of climate-related catastrophe losses in the EU are insured, and this gap is expected to widen as the impact of climate change grows. Lack of climate-catastrophe insurance can impact the economy and overall financial stability, as ordinary insurance does not cover such losses, and households and businesses cannot resume their activities as quickly, slowing economic recovery.

The joint discussion paper is part of EIOPA’s sustainable finance agenda and work to improve the overall understanding of climate-related risk and aims to close the climate insurance protection gap.

More information is available here.

European Banking Authority (EBA)

April 24, 2023

EBA consults on guidance on benchmarking of diversity practices

The EBA launched a consultation on guidelines for benchmarking diversity practices including diversity policies and gender pay gap under the Capital Requirements Directive (CRD) and the Investment Firms Directive (IFD). The guidelines will address the collection of data on diversity policies, diversity practices and the gender pay-gap at the level of the management body, apply to institutions and investment firms and provide templates and instructions for the collection of diversity data. They are intended to ensure that benchmarking covers a representative sample of institutions and investment firms in each member state and will help raise awareness of these issues among all stakeholders.

More information is available here.

European Central Bank (ECB)

April 21, 2023

ECB report: Banks must improve climate risk disclosures

While banks have published more information on climate and environmental risks over the past year, the ECB report notes that the quality of their disclosures is still too low to meet upcoming supervisory standards. As a result, European banks must prepare to comply with stricter EU rules on climate and environmental risk disclosure, which take effect this year. The implementing technical standards (ITS) issued by the EBA on Pillar 3 disclosures—a set of reporting standards on environmental, social and governance risks—will apply to most significant banks in the euro area.

More information is available here and here.

European Parliament

April 20, 2023

Green light for new EU legislation on crypto assets

The Parliament also gave the final green light to new common rules on the supervision, consumer protection and environmental safeguards of crypto assets, including crypto currencies (MiCAR). The draft law includes safeguards against market manipulation and financial crime and will cover crypto assets not regulated by existing financial services legislation. The main provisions for issuers and traders of crypto assets (including asset reference tokens and e-money tokens) relate to transparency, disclosure, authorization, and supervision of transactions.

In addition, the new framework will support market integrity and financial stability through the regulation of public offerings of crypto assets. Finally, the agreed text includes measures against market manipulation and to prevent money laundering, terrorist financing and other criminal activities. To combat money-laundering risks, ESMA is expected to establish a public register listing those noncompliant crypto assets service providers operating in the EU without authorization.

More information is available here and here.

European Parliament

April 20, 2023

New standard to fight greenwashing in the bond markets

EU negotiators agreed on the first standard for the issuing of green bonds. The European Green Bonds Standard (EUGBS), which companies issuing a bond can choose to comply with, will primarily allow investors to target their investments towards more sustainable technologies and businesses. It also gives companies issuing such bonds more certainty that they are suitable for investors looking to add green bonds in their portfolio. The standard is consistent with the more horizontal Taxonomy legislation that determines which economic activities can be considered as environmentally sustainable and, overall, intends to reduce greenwashing.

More information is available here.

European Central Bank (ECB)

April 18, 2023

ECB and SRB welcome legislative proposals for bank crisis management and deposit insurance framework

The ECB and the Single Resolution Board (SRB) participated in the consultation process leading to the European Commission’s proposals for bank crisis management and deposit insurance framework. The framework includes both a clarification on the scope of application of a resolution in relation to national liquidation procedures and enhancements to the ESAs’ toolkit for managing bank failures in a way that effectively protects critical functions as well as citizens. Both institutions are willing to provide technical input to further improve the Commission’s proposals and ensure that the overall framework is consistent and workable. The proposed legislative changes are seen as an important and pragmatic step forward in terms of bank crisis management and deposit insurance.

More information is available here.

European Supervisory Authorities (ESAs)

April 12, 2023

ESAs propose amendments to extend and simplify sustainability disclosures

The three ESAs published a consultation paper with amendments to the Delegated Regulation of the Sustainable Finance Disclosure Regulation (SFDR), proposing changes to the disclosure framework to address issues that have emerged since the introduction of SFDR, including various technical adjustments and simplifications. In addition, the amendments are expected to include an expansion of the list of universal social indicators for disclosing key principal adverse impacts of investment decisions, a refinement of the content of other indicators for principal adverse impacts, and the inclusion of product disclosures on decarbonization targets.

More information is available here.

European Securities and Markets Authority (ESMA)

March 30, 2023

ESMA provides guidance for supervision of copy trading services

ESMA published a supervisory briefing on firms offering copy trading services, in accordance with its objective of fostering investor protection and actively promoting supervisory convergence across the EU. The briefing includes guidance on the qualification of copy trading services as an investment service and sets out supervisory expectations regarding various MiFID II requirements, such as information requirements, product governance, remuneration, etc. The briefing reflects the supervisory expectations of both ESMA and National Competent Authorities (NCAs) and also includes indicative questions that supervisors could ask themselves, or respective firms, when assessing the firms’ approaches to the application of the relevant MiFID II rules.

More information is available here.

European Banking Authority (EBA)

March 29, 2023

EBA consults on amendments to guidelines on risk-based AML/CFT supervision to include crypto asset service providers

The EBA launched a public consultation on amendments to its guidelines on risk-based anti-money laundering and countering the financing of terrorism (AML/CFT) supervision. The proposed changes extend the scope of these guidelines to AML/CFT supervisory of crypto-asset service providers (CASPs) and include guidance on the sources of information competent authorities should consider when assessing ML/TF risks associated with CASPs. They also highlight the importance of a consistent approach to setting supervisory expectations in cases where multiple competent authorities are responsible for the supervision of the same institutions.

More information is available here.

European Securities and Markets Authority (ESMA)

March 27, 2023

ESMA updates its guidance on product governance

ESMA published its final report on the MiFID II product governance guidelines. The product governance requirements introduced by MiFID II have proven to be one key element of the MiFID II investor protection framework aimed at ensuring that financial instruments and structured deposits (“products”) are only manufactured and/or distributed when this is in the best interest of clients. By aiming to ensure a consistent and harmonized application of the product governance requirements, the guidelines will ensure that the objectives of MiFID II can be efficiently achieved.

More information is available here.

European Supervisory Authorities (ESAs) and European Central Bank (ECB)

March 13, 2023

ESAs and ECB call for enhanced climate-related disclosure for structured finance products

The three ESAs, together with the ECB, published a joint statement on climate-related disclosure for structured finance products. The statement encourages the development of disclosure standards for securitized assets through harmonized climate-related data requirements. Currently, there is a lack of climate-related data on assets underlying structured finance products. This poses an obstacle for the classification of products and services under the EU Taxonomy Regulation and Sustainable Finance Disclosure Regulation (SFDR) and hinders the proper assessment and management of climate-related risks. The statement outlines the joint efforts of the ECB and the ESAs to facilitate access to climate-related data to improve sustainability-related transparency in securitizations and to promote consistent and harmonized requirements for similar instruments.

More information is available here.

European Banking Authority (EBA)

February 21, 2023

EBA publishes final revised guidelines on methods for calculating contributions to deposit guarantee schemes (DGS)

The EBA published revised guidelines on deposit guarantee schemes (DGS), which harmonize the methodology for the DGS to collect contributions from credit institutions in proportion to their riskiness, thereby further strengthening the link between the riskiness of a credit institution and how much it needs to contribute to the DGS funds that will be used to reimburse depositors in the event their bank fails.

More information is available here.

European Banking Authority (EBA)

February 13, 2023

EBA asks authorities to increase transparency on their approach to bail-in in case of banking failure

The EBA published its final guidelines for resolution authorities on how to apply the bail-in mechanism—the main tool available to authorities to avoid using taxpayer money in the event a large bank fails. Transparency and predictability are central both to the credibility of the resolution framework and to ensuring investors’ protection. The guidelines seek to ensure that a minimum level of harmonized information is published on how authorities would effectively implement the write down and conversion of capital instruments and apply the bail-in tool (“exchange mechanic”).

More information is available here.

European Insurance and Occupational Pensions Authority (EIOPA)

February 7, 2023

EIOPA’s Risk Dashboard points to overall resilience in insurance sector despite high macro and market risks

EIOPA published its Risk Dashboard based on Solvency II data from the third quarter of 2022, which summarizes the main risks and vulnerabilities of the EU insurance sector and is based on data collected from insurance groups and insurance undertakings. The results show that insurers’ exposures to macro and market risks are currently the insurance sector’s biggest concern. In particular, market risks are currently at high levels and remain a key source of concern amid a further decrease in global GDP growth. All other risks categories, such as profitability and solvency, climate as well as digitalization and cyber risks stay at medium levels.

More information is available here and here.

European Insurance and Occupational Pensions Authority (EIOPA)

February 3, 2023

EIOPA outlines approaches to strengthen oversight of third country governance arrangements

EIOPA has published a supervisory statement to strengthen the supervision and monitoring of insurance undertakings’ and intermediaries’ activities when using governance arrangements in third countries. EIOPA has previously emphasized that EU-based undertakings or intermediaries should not resemble empty-shell companies without an appropriate level of corporate substance within the EU. But such governance arrangements that include third-country branches can lead to poor risk management, ineffective decision-making and pose operational, reputational and financial risks—also to policyholders. With this in mind EIOPA has clarified its supervisory expectations.

More information is available here and here.

European Securities and Markets Authority (ESMA)

February 1, 2023

ESMA reviews the scope of clearing and derivatives trading obligations

ESMA published its final report on clearing (CO) and derivative trading (DTO) obligations to accompany the benchmark transition. The report includes proposals for draft Regulatory Technical Standards (RTS) amending the scope of the CO and DTO for over-the-counter (OTC) interest rate derivatives (IRD) denominated in EUR, GBP, JPY, and USD. The report is part of the transition from EONIA and LIBOR to alternative benchmarks—primarily Risk-Free Rates, such as €STR, SOFR, SONIA and TONA. ESMA’s proposed amendments aim to ensure a smooth benchmark transition while maintaining an effective scope for these obligations.

More information is available here.

European Supervisory Authorities (ESAs)

January 31, 2023

ESAs consult on draft guidelines on the exchange of information relevant to fit and proper assessments

The three ESAs published a consultation paper on draft joint guidelines on the system for the exchange of information relevant to the assessment of the fitness and propriety of holders of qualifying holdings, directors, and key function holders of financial institutions by competent authorities. The guidelines aim to increase the efficiency of the information exchange between sectoral supervisors by harmonizing practices and clarifying how competent authorities should use the information system developed by the three ESAs.

More information is available here.

European Securities and Markets Authority (ESMA)

January 26, 2023

ESMA issues its first opinion on the draft European Sustainability Reporting Standards

ESMA issued an opinion on the first draft of the European Sustainability Reporting Standards (ESRS Set 1), developed by the European Financial Reporting Advisory Group (EFRAG). ESMA finds that ESRS Set 1 broadly meets the objective of being conducive to investor protection and not undermining financial stability. ESMA’s opinion was drafted at the request of the European Commission and in accordance with the mandate set out in the Corporate Sustainability Reporting Directive (CSRD). As a next step, the Commission will now consider ESMA’s opinion together with opinions submitted by the EBA, EIOPA and other public bodies and adopt ESRS Set 1 into delegated acts by June 30, 2023.

More information is available here.

European Supervisory Authorities (ESAs)

January 26, 2023

ESAs issue their opinions on draft standards governing corporate sustainability disclosures (ESRS)

EIOPA and the EBA have determined that the draft meets its objectives and is consistent with international standards and any other relevant EU Regulation. In particular, EIOPA welcomes the general approach on the materiality assessment and the mandatory disclosure requirements that are crucial for financial market participants to calculate and report their principle adverse impact indicators under the SFDR. In addition, the EBA very much welcomes the level of alignment with the Pillar 3 disclosure requirements reached at this stage. Nonetheless, EIOPA is of the opinion that more clarity is needed on the boundaries of the value chain for insurers and pension funds so that relevant material sustainability impacts may be reported in a proportionate and risk-based manner.

More information is available here and here.

European Securities and Markets Authority (ESMA)

January 25, 2023

ESMA and the UK FCA agree on the recognition of UK benchmark administrators in the EU

ESMA and the UK Financial Conduct Authority (FCA) have agreed on a new Memorandum of Understanding (MoU) on the cooperation and the exchange of information in relation to benchmark administrators based in the UK. The MoU addresses benchmark administrators who seek recognition or are recognized in the EU and allows ESMA to recognize benchmarks administrators from the UK. Such an agreement with the relevant non-EU authority is required under the Benchmarks Regulation where a non-EU benchmark administrator seeking recognition in the EU is subject to supervision in its home country for ESMA to grant recognition to that non-EU administrator.

More information is available here.

European Securities and Markets Authority (ESMA)

January 17, 2023

Costs of retail investment products continue slow decline

ESMA published its fifth annual report on the costs and performances of retail investment products in the EU between 2012 and 2021. The authority has found that the costs of investing in key retail financial products continue to decline, albeit very slowly. The costs and performance of retail investment products are key determinants of the benefits and risks faced by retail investors in the EU. Clear and comprehensive information on retail investment products can (i) help investors assess the past performance and costs of products offered across the EU and (ii) encourage retail participation in capital markets. ESMA’s report helps to monitor progress in this regard by providing consistent information across the EU on the costs and performance of retail investment products. It also demonstrates the importance of disclosing costs to investors, as required by the MiFID II, UCITS and PRIIPs regulations, and the need for asset managers and investment firms to act in the best interest of investors, particularly given their role in manufacturing and distributing investment products.

More information is available here.