The European Supervisory Authorities (EBA, EIOPA and ESMA – the ESAs) launched today a public consultation on the second batch of policy mandates under the Digital Operational Resilience Act (DORA).
Today’s package includes four draft regulatory technical standards (RTS), one set of draft implementing technical standards (ITS) and two sets of guidelines (GL). These policy instruments aim to ensure a consistent and harmonised legal framework in the areas of major ICT-related incident reporting, digital operational resilience testing, ICT third-party risk management and oversight over critical ICT third-party providers. The consultation runs until 4 March 2024.
Through DORA the ESAs are mandated to jointly develop a total of 13 policy instruments, presented in two batches. This second batch comprises the following:
RTS and ITS on content, timelines and templates on incident reporting
GL on aggregated costs and losses from major incidents
RTS on subcontracting of critical or important functions
RTS on oversight harmonisation
GL on oversight cooperation between ESAs and competent authorities
Comments on this consultation can be sent to the ESAs via the consultation page. Please note that the deadline for the submission for comments is 4 March 2024. All contributions received will be published following the end of the consultation, unless requested otherwise.
A public hearing will be organised in the form of a webinar on 23 January 2024 from 09:00 to 18:00 CET. The ESAs invite interested stakeholders to register using the Registration form by 16:00 CET on 19 January 2023. The dial-in details will be communicated to the registered participants in due time.
Legal basis, background and next steps
DORA, which entered into force on 16 January 2023 and will apply from 17 January 2025, aims to enhance the digital operational resilience of entities across the EU financial sector and to further harmonise key digital operational resilience requirements for all EU financial entities.
The ESAs expect to submit the draft technical standards to the European Commission and issue the guidelines by 17 July 2024.
The European Securities and Markets Authority (ESMA), the EU’s financial markets regulator and supervisor, today released a Report on EU credit ratings for collateralised loan obligations (CLO).
The report highlights potential conflicts of interest risks that were observed in the dialogue between Credit Rating Agencies (CRAs) and market participants, and the potential influence these may have had on the CLO methodology development and rating process of the concerned CRAs from 2017 to 2021.
CRAs must have sound controls over their market outreach activity to ensure the accuracy, objectivity, and independence of credit ratings, as well as the independent development of rating methodologies.
Main findings of the report:
The CLO market and the role of CRAs
CLOs are sophisticated securitisation products. Given their complexity and opacity, CLO market participants continue to use credit ratings to support their decision making. In the CLO market, the arrangers, managers and investors, rather than the issuers, have an influential role in determining which CRA will be chosen for the deal. It is common practice that analysts employed by CRAs and responsible for methodology development also participate in market outreach activities involving those market participants.
Organisational aspects of market outreach activities
Analytical market outreach to industry plays an important role for CRAs, and ESMA recognises the benefits of this interaction. At the same time, without adequate controls in place, there is a risk that the CLO methodologies developed by CRAs could be unduly influenced by commercial feedback, and by the type of information provided by market participants. Analytical outreach and the boundaries of that outreach need to be carefully safeguarded and communicated to the staff of CRAs.
Sharing of non-analytical information
In some instances, market outreach included the sharing of information that ESMA considers not appropriate.[VR6][NK7][EL8][IL9][NK10] This included, on occasion, market participants sharing with CRAs feedback on the commercial perception of a methodology. Such information could provide rating analysts with commercial information that results in a perception of, or actual, conflict of interests. This could impair the accuracy, objectivity and independence of CLO credit ratings[VR11][NK12] .
ESMA has informed each CRA of its findings and will develop individual remedial action plans to ensure appropriate safeguards and controls are in place.
ESMA will continue to monitor the developments in CLO markets, including changes in CLO credit ratings, rating practices and rating methodologies.
The three European Supervisory Authorities (EBA, EIOPA and ESMA – the ESAs) today launched a second consultation related to the joint Guidelines on the system for the exchange of information relevant to fit and proper assessments.
The consultation covers amendments extending the scope of the joint Guidelines to legal persons, thus ensuring the complete coverage of data subjects. These Guidelines aim to increase the efficiency of the information exchange between sectoral supervisors by harmonising practices and covering both natural and legal persons. The consultation runs until 15 January 2024.
ESAs invite comments only on the inclusion of legal persons in the scope of the Guidelines and the information to be exchanged in relation to them. Other comments will not be taken into account as they are in the scope of the first consultation that is now closed.
Comments to this second consultation can be sent by clicking on the "send your comments" button on the EBA's consultation page.
The deadline for submission of comments is 15 January 2024.
All contributions received will be published following the end of the consultation, unless requested otherwise.
Legal basis and next steps
The draft joint Guidelines have been developed in accordance with Article 31(a) of ESAs Founding Regulations, which mandates the ESAs to jointly establish a 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 in accordance with the legislative acts referred to in Articles 1(2) of the ESAs Founding Regulations.
ESMA has previously decided to postpone to 2024 the annual amendment of the ESEF Regulatory Technical Standards (RTS) reflecting the 2023 International Financial Reporting Standards (IFRS) Taxonomy. As such, the update of the ESEF XBRL taxonomy 2022 files and the ESEF Conformance Suite 2023 is limited to:
Minor corrections aimed at improving usability, and
Updated Conformance Suite test fields facilitating the implementation of the updated version of the ESEF Reporting Manual into software products used by preparers to produce their ESEF report package.
The European Securities and Markets Authority (ESMA), the EU’s financial markets regulator and supervisor, contributes to the transition towards a more sustainable economy in line with the European Green Deal and global efforts to address the climate crisis.
Verena Ross, ESMA Chair, attended COP28 and spoke about ESMA’s sustainable finance work. In her role as co-Chair of the International Organization of Securities Commission’s (IOSCO) Sustainable Finance Carbon Markets Workstream, she also promoted ESMA’s and IOSCO’s contribution to the global sustainability agenda.
Verena Ross, Chair:
“Addressing climate change requires us to act now and ESMA is playing its part in contributing to the ambitious goals agreed internationally. There is an urgent need to support the financial sector in channelling the necessary resources towards sustainable investment and doing so in a way that preserves investors’ trust.
“At COP28, I continue to convey ESMA’s and IOSCO’s role in supporting the financial sector’s effort to aid the transition to a climate neutral and sustainable economy. In particular, as co-Chair of IOSCO’s carbon markets workstream, I am advocating for enhancing the integrity and orderly functioning of Voluntary Carbon Markets (VCMs), on the back of the launch of IOSCO’s consultation paper on good practices for VCMs.”
International cooperation is key to ensuring that consistent measures are taken to protect investors and support financial stability, as the demand for sustainability-related financial products continues to grow. Building an internationally comparable set of rules and principles that are applicable across the entire sustainable investment value chain will help to address the global challenges facing us.
ESMA's mandate and determination to integrate environmental, social, and governance (ESG) factors across all its activities is reflected in ESMA’s Strategy and the Sustainable Finance Roadmap. Given our core investor protection role, ESMA focuses on building and maintaining a trusted environment for sustainable investing. The ultimate objective is to support channelling the necessary capital flows to meet the EU’s decarbonization targets as well as its wider environmental and social objectives.
ESMA has been engaging extensively with stakeholders to provide guidance around the sustainable finance regulatory framework. Working with the national supervisors to ensure consistent implementation and effective and convergent supervision and enforcement of the ESG framework at is equally important. In this context, ESG disclosures became one of our two Union-wide strategic supervisory priorities.
To better understand ESMA’s contribution to the sustainable finance agenda in 2023 and our future work in 2024, check Annex 1 or this set of visuals.
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