EU & UK Reg Round Up: 11/02/2025

European Banking Authority

EBA amends guidelines on ICT and security risk management under DORA - 11 February 2025

The European Banking Authority (EBA) has updated its Guidelines on ICT and security risk management to align with the Digital Operational Resilience Act (DORA), which took effect on 17 January 2025. These amendments clarify legal obligations and simplify ICT risk management by limiting the Guidelines’ scope to entities covered by DORA, including credit institutions, payment institutions, and e-money institutions. Requirements under the Payment Services Directive (PSD2) remain applicable to other payment service providers (PSPs) not covered by DORA. Member States can choose to maintain the previous EBA Guidelines for these PSPs through national regulations.

EBA Peer Review confirms supervisors applied recommendations on tax integrity and dividend arbitrage - 6 February 2025

The European Banking Authority (EBA) has published a Peer Review assessing how supervisors have integrated tax integrity and dividend arbitrage risks into their oversight following the EBA’s 2020 Action Plan. The review found that most supervisors adequately applied the EBA’s benchmarks, reinforcing financial institutions’ responsibility to manage tax crime risks. The report, based on six national authorities, evaluated supervisory approaches to tax integrity across AML/CFT and prudential supervision. While not assessing national tax crime enforcement, the findings highlight progress in embedding tax integrity in governance and risk assessments. The EBA has issued follow-up measures to enhance supervisory consistency across the EU.

EBA outlines short to medium-term objectives for IRRBB Heatmap - 6 February 2025

The European Banking Authority (EBA) has published a Report on the short to medium-term objectives of its interest rate risk in the banking book (IRRBB) Heatmap, providing observations and recommendations without introducing new requirements. Key areas of focus include behavioural assumptions for non-maturity deposits (NMD), supervisory considerations for institutions flagged as outliers under net interest income (NII) tests, and guidance on commercial margin modelling. The Report also emphasizes prudent hedging strategies, particularly the role of interest rate derivatives. The EBA will continue discussions on long-term IRRBB developments, including the 5-year cap on NMD repricing and credit spread risk in non-trading book activities.

EBA supports European Commission’s amendments to RTS on conflicts of interest for ART issuers - 5 February 2025

The European Banking Authority (EBA) has issued an Opinion endorsing the European Commission’s proposed amendments to its draft Regulatory Technical Standards (RTS) on conflicts of interest for issuers of asset-referenced tokens (ARTs) under the Markets in Crypto-Assets Regulation (MiCAR). The EBA supports the changes, which enhance proportionality while maintaining strong governance requirements. The RTS set out policies and procedures to mitigate conflicts of interest, aligning crypto-asset regulations with EU financial sector standards. The EBA developed these standards in response to recent governance failures in the global crypto market, ensuring greater regulatory convergence across the EU.

EBA finalises technical standards on reporting of charges and rejected transactions, delays first reporting to 2026 - 4 February 2025

The European Banking Authority (EBA) has published its final draft Implementing Technical Standards (ITS) on reporting data related to charges for credit transfers, payment accounts, and rejected transactions under the Instant Payment Regulation (IPR). These standards aim to ensure transparency in pricing and access to instant credit transfers by standardising reporting from banks, payment institutions, and e-money institutions to their National Competent Authorities. Following industry feedback, the EBA has postponed the first harmonised reporting by 12 months, moving the deadline from April 2025 to April 2026, with subsequent reporting to the EBA and the European Commission set for October 2026. This delay allows time for the adoption of the final ITS, as well as the development of necessary taxonomy, datapoint models, and validation rules. In the meantime, authorities are advised not to enforce reporting requirements or collect unharmonized data before the standards are fully implemented.

European Securities and Markets Authority

 
ESMA consults on CCP authorisations, extensions, and validations under EMIR 3 - 7 February 2025

The European Securities and Markets Authority (ESMA) has launched two public consultations as part of the review of the European Market Infrastructure Regulation (EMIR 3). The consultations seek stakeholders' input on the conditions for CCP authorisation extensions and the required documentation for initial authorisation applications. They also cover the conditions for validating changes to central counterparty (CCP) models and parameters. EMIR 3 aims to improve the efficiency and competitiveness of EU clearing services and CCPs by streamlining the supervisory procedures for initial authorisations, extensions, and validations. The consultation forms part of this initiative to simplify and shorten these processes.

ESMA contributes to simplification and burden reduction in financial reporting - 7 February 2025

The European Securities and Markets Authority (ESMA) is actively supporting the European Commission’s goal to simplify and reduce the reporting burden in the financial sector. In December 2024, the ESMA Board of Supervisors discussed ways to contribute to simplifying regulatory actions, while maintaining the core objectives of financial stability, orderly markets, and investor protection. ESMA has focused on several key areas for simplification: transparency and volume cap regimes, transaction reporting, and digitalising sustainability and financial disclosures.

ESMA publishes survey results on Legal Entity Identifiers - 3 February 2025

The European Securities and Markets Authority (ESMA) has published the findings from its October 2024 survey on Legal Entity Identifiers (LEIs). The survey gathered input on the impacts of incorporating alternative identifiers for reporting, disclosure, or record-keeping requirements. Key survey findings include high costs for financial firms to adapt reporting systems to include additional identifiers with an average cost of 360,000 per firm, and a median cost of 40,000 to adapt. An overwhelming 86% of respondents prefer the ELI as the primary legal identify for reporting purposes.

ESMA publishes quarterly liquidity assessment for bonds - 31 January 2025

The European Securities and Markets Authority (ESMA) has published its latest quarterly liquidity assessment for bonds traded on EU trading venues. This assessment evaluates 1,342 liquid bonds that are subject to MiFID II transparency requirements for this period. ESMA’s bond liquidity assessment is based on key quantitative criteria, including the daily average trading activity (both trades and notional amount) and the percentage of days these bonds are traded within each quarter. The liquidity assessment is updated quarterly, with potential additional updates if new data or corrections are submitted during the quarter. These updates are made available via ESMA’s Financial Instruments Transparency System (FITRS) and are applicable the day following publication.

Bank of England

Bank of England reduces bank rate to 4.5% - 6 February 2025
Bank of England’s Monetary Policy Committee (MPC) announced a reduction in the Bank Rate to 4.5%, a decrease of 0.25 percentage points. This decision follows significant progress on disinflation, aided by a reduction in external shocks and the restrictive stance of monetary policy over the past two years. Despite moderating domestic inflationary pressures, some remain elevated. Higher global energy costs and regulated price changes are expected to push CPI inflation to 3.7% in Q3 of 2025, though underlying inflationary pressures are anticipated to decline further. CPI inflation is expected to fall back to around the 2% target thereafter.

Bank of England welcomes EU equivalence extension for UK CCPs - 31 February 2025

The Bank of England has expressed its approval of the European Commission’s decision to extend EU equivalence for the UK’s legal and supervisory framework for central counterparties (CCPs). This extension supports financial stability and the smooth functioning of financial markets in both the UK and the EU. The Bank of England also emphasized its commitment to continuing close cooperation with the European Securities and Markets Authority (ESMA) as the process of extending the existing recognition of UK CCPs progresses.

Bank of England opens contingent non-bank financial institution repo facility (cnrf) - 28 January 2025

The Bank of England has officially opened the application process for the Contingent Non-Bank Financial Institution Repo Facility (CNRF), designed to provide emergency liquidity during periods of severe gilt market dysfunction. This facility will lend to eligible non-bank financial institutions, such as insurance companies, pension schemes, and liability-driven investment funds, in times of market stress to support financial stability. The Bank of England’s initiative aims to reduce the need for non-bank financial institutions to sell assets during times of financial instability, reinforcing the importance of these entities to the overall stability of the UK financial system.