Joint EBA-ESMA Guidelines on the Assessment of the Suitability of Members of the Management Body and Key Function Holders
November 2
The EBA and ESMA issued joint guidelines relating to the suitability of management body members and key function holders and how relevant institutions can assess this suitability. Each member is to have a sufficient time commitment, with their honesty, integrity, and independence of mind to be assessed, as well. The management body as a whole is to have adequate collective knowledge, skills and experience. Institutions must take diversity into account when recruiting management body members and provide sufficient human and financial resources for the induction and training of the recruited members.
The guidelines also specify that assessments should be made of key function holders, defined as the heads of the internal control functions, the CFO, and any other people who have significant influence over the direction of the institution without being a member of the management body. Institutions had until December 28, 2021, to notify the EBA and ESMA whether they comply, intend to comply, or have reasons not to comply with the guidelines. The guidelines applied from December 31, 2021.
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European Commission Launches a Consultation on Corporate Reporting
November 12
The European Commission launched a consultation on November 12, lasting until February 4, to improve the quality and enforcement of corporate reporting. The consultation will feed into an impact assessment that the Commission will prepare in 2022 to identify problems with the quality of corporate reporting and compare possible remediation options. The target audience of the consultation is companies, auditors, public authorities and supervisors, asset managers, retail investors, and civil society.
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ESMA Proposes Changes to the Scope of the Clearing and Derivative Trading Obligations for the Benchmark Transition
November 18
ESMA set out proposed draft RTSs changing the scope of Clearing Obligations (COs) and Derivative Trading Obligations (DTOs) for over-the-counter (OTC) interest rate derivatives (IRDs) as part of the transition away from the Euro Overnight Index Average (EONIA) and London Interbank Offer Rate (LIBOR) and onto alternative benchmarks, particularly Risk-Free Rates. ESMA proposed introducing IRD classes referencing €STER, SONIA, and SOFR to the CO. It also provided a timeline for when the changes should come into effect. The draft RTSs have been submitted to the European Commission for endorsement.
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ESMA Seeks Investor Protection and Intermediaries Experts for Stakeholder Panel
November 18
ESMA issued a call for candidates to renew the composition of its Consultative Working Group, which advises its Investor Protection and Intermediaries Standing Committee (IPISC). The IPISC undertakes ESMA’s work relating to the provision of investment services and activities to clients by investment firms and credit institutions and of crowdfunding services by crowdfunding service providers. The deadline for candidates to send their application was extended to January 18, 2022.
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ESMA Launches Public Consultations on Central Counterparty Resolution Regime
November 18
On November 18, ESMA launched six public consultations to gather stakeholder feedback on how to implement its Public Consultations on Central Counterparty (CCP) resolution mandates. The six consultation papers contain draft RTS proposals relating to resolution colleges, the valuation of CCPs’ assets and liabilities in resolution, the safeguards for clients and indirect clients, and the content of resolution plans. They also contain draft guidelines on the valuation in termination of contracts and on the application of the circumstances under which a CCP is deemed to be failing or likely to fail. The closing date for responses is January 24, 2022, aiming to publish the final reports by Q2 2022.
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ESMA and the EBA Consult on Framework for the Supervisory Review and Evaluation Process of Investment Firms
November 18
ESMA and the EBA launched a public consultation, which will last until February 18, on their guidelines relating to common procedures and methodologies for the supervisory review and evaluation process (SREP). In the context of the Investment Firms Regulation and Directive, the draft joint SREP guidelines set out the process and criteria for the assessment of the four main SREP elements: business model, governance arrangements and firmwide controls, risks to capital and capital adequacy, and liquidity risk and liquidity adequacy. A scoring system will be introduced to compare these elements across firms.
The EBA has also launched a consultation for draft RTSs on the additional of fund requirements that could be determined by competent authorities for investment firms. These draft RTSs set out guidance on the measurement of risks to capital in further detail. This consultation will also last until February 18.
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ESMA Consults on Public Consultations on Centre Counterparty Investment Practices for Highly Liquid Financial Instruments
November 18
ESMA launched a consultation paper examining the potential extension of the list of financial instruments eligible for investments by CCPs under the European Market Infrastructure Regulation (EMIR). The consultation paper covers the benefits and disadvantages of including financial instruments that are highly liquid, with minimal market and credit risk, and assesses whether money market funds can be included under the EU Money Market Funds Regulation. The consultation paper will be of interest to EU CCPs, their clearing members, and those members’ clients. Contributions are open until January 24, 2022, and ESMA aims to publish a final report in spring 2022.
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European Commission Launches a Public Consultation on Public Capital Markets and Access to Capital for SMEs
November 19
In line with the Better Regulation principles, the European Commission launched a consultation on regulatory barriers to companies’ listing to understand the main drivers behind the recent trends in the IPO market and assess the impact of possible legislative measures. Views are invited from all stakeholders, in particular from Member States, national competent authorities and ESMA, market participants, stock exchanges, investors, and consumer and investor organisations. The consultation will end on February 11. The Commission has launched a parallel and more targeted public consultation to seek more technical views.
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ESMA Seeks Input on EMIR Clearing Threshold Framework
November 22
ESMA has published a discussion paper on EMIR clearing thresholds, seeking feedback from market participants and from counterparties trading OTC derivatives. ESMA aims to collect views on the effectiveness and proportionality of the thresholds and on the EMIR regime as a whole as well as the effectiveness of the EU regime compared with similar third-country regimes. Reponses will be collected until January 19.
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ESMA Publishes Its 2020 Annual Report on EU Market Abuse Sanctions
November 23
The ESMA published its annual report on administrative and criminal sanctions and other administrative measures issued across the EU under the Market Abuse Regulation (MAR) in 2020. The report found that National Competent Authorities and other authorities imposed a total of EUR 17.5 million in fines related to 541 administrative and criminal actions. This represents an increase in measures (279) but a significant decrease in financial penalties (EUR 82 million) compared to 2019. The number of criminal sanctions decreased compared to 2019, amounting in 2020 to 18 such sanctions worth EUR 246,000.
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Combating ML/TF: The AMF Applies EBA Guidelines on Risk Factors
November 24
On November 24, the AMF stated that it applied EBA guidelines on money laundering and terrorist financing (ML/FT) risk factors. The guidelines relating to risk assessment have been revised and detailed and now list the steps, sources and analyses to be carried out to assess each of the four risk categories. They also detail customer due diligence measures to be outlined within policies and procedures, provide details on the notion of beneficial owners and ways of identifying them, and list developments regarding entering into a relationship remotely and the use of new technologies for the purpose of identity verification. New guidelines on the obligation to train staff and on the overall assessment of the effectiveness of their anti-ML and combatting the financing of terrorism (AML/CFT) strategy have been added. The new EBA guidelines on ML/FT risk factors repeal those published in 2017 and have been in effect since October 26, 2021.
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EIOPA, ESMA and the EBA Submit Draft RTS under the SFDR
November 25
On October 22, 2021, the EIOPA, ESMA and the EBA jointly submitted to the European Commission draft RTSs under the SFDR. Given their length and technical detail, the Commission did not adopt these draft RTSs within the three-month period because it requires more time for the adoption process. In a letter to the Committee on Economic and Monetary Affairs and to the Ecofin Council, John Berrigan, Director-General for Financial Stability, Financial Services and Capital Markets Union, recommended bundling these draft RTSs with draft RTSs from the SFDR in a single delegated act with an application date of January 1, 2023. Berrigan also stated that financial market participants will have to comply with the disclosure requirements outlined in the act by June 30, 2023.
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ESMA Continues to See Risk of Market Corrections amid Elevated Valuations
November 26
ESMA has published its second Risk Dashboard for 2021 (covering Q3), with unchanged risk levels (high). ESMA justified the high risk levels based on the market environment’s high uncertainty, continued elevated asset valuations with risk of price corrections, and abrupt shifts in risk premia. It stated that the most important risk drivers for Q3 2021 are the economic outlook, inflation uncertainty, indebtedness in sovereign and private debt markets, and political and event risks.
ESMA indicated that the macroeconomic outlook has brightened in the previous months and that there is realistic scope of a reduction in risk levels depending on the resilience of financial markets in the medium term. Sources of possible exacerbation of long-term vulnerabilities for financial and non-financial sectors are the aftermath of the COVID-19 pandemic, its resurgence in Q4, and uncertainty around inflation and the continuation of fiscal and monetary policy support.
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Format and Procedures for Filing AFRs and URD Equivalents of AFRs as of January 1, 2022
November 26
The AMF reiterated that listed issuers must file their Annual Financial Reports (AFRs) in European Single Electronic Format (ESEF) from January 1, 2022. The terms for filing AFRs, Universal Registration Documents (URDs), and annual reports have changed slightly. The AFR should be filed with the AMF by the primary information provider or by the company directly; the URD equivalent of the AFR should be filed only by the company; the filed document must be published on the issuer’s website. The AFR or URD equivalent of the AFR must be submitted in ESEF exclusively. The filing procedures and the description of the expected files are indicated in the AMF’s FAQ.
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