EU & UK Reg Round Up: 13/11/2024

Likith Kumar Jayaraman -

European Banking Authority

EBA publishes follow-up report on supervision of non-performing exposures management - 07 November 2024

The European Banking Authority (EBA) has released a follow-up to its 2022 Peer Review report, assessing how competent authorities supervise credit institutions' management of non-performing exposures (NPEs). The report highlights notable improvements in supervisory practices across competent authorities, demonstrating a more comprehensive application of EBA Guidelines on managing non-performing and forborne exposures. While the EBA commends these advancements, it cautions authorities against complacency, emphasizing the importance of ongoing vigilance regarding NPE ratios. The follow-up review evaluated a subset of EU competent authorities, selected based on the initial 2022 findings. All reviewed authorities are now fully or largely compliant with the EBA’s specific guidelines, reflecting enhanced supervisory methodologies and practice levels. Although no further recommendations are necessary, the EBA urges competent authorities to monitor credit quality closely in light of the NPE increase noted in its July 2024 Risk Assessment Report, encouraging early interventions where NPE growth is detected.

ESAs release third annual report on principal adverse impact disclosures under SFDR - 30 October 2024

The European Supervisory Authorities (EBA, EIOPA, and ESMA) have published their third annual report on disclosures of principal adverse impacts (PAI) as mandated by the Sustainable Finance Disclosure Regulation (SFDR). This report evaluates the PAI disclosures at both the entity and product levels, focusing on how financial institutions, such as asset managers and banks, are reporting the adverse effects of their investments on the environment and society. The report finds that financial institutions have improved the accessibility and quality of their PAI disclosures. National Competent Authorities (NCAs) have also noted a slight increase in compliance with SFDR disclosure requirements. Moving forward, the report includes recommendations for NCAs to encourage consistent supervision and calls on the European Commission to conduct a comprehensive review of the SFDR.

ESAs publish final report on implementing technical standards for ESAP - 29 October 2024

The European Supervisory Authorities (EBA, EIOPA, and ESMA) released their Final Report on the draft Implementing Technical Standards (ITS) for the European Single Access Point (ESAP). As mandated by Level 1 legislation, the ESAP will function as a centralized platform where entities submit financial and sustainability information through “collection bodies” such as national authorities and EU agencies, which then relay it to the ESAP. These ITS lay the foundation for establishing a fully operational ESAP, detailing the requirements for collection bodies and ESAP functionalities to ensure users can easily access comprehensive information.

ESAs launch survey on initial margin model authorisation under EMIR3 - 29 October 2024

The European Banking Authority (EBA), in collaboration with the European Securities and Markets Authority (ESMA) and the European Insurance and Occupational Pensions Authority (EIOPA), has launched a survey for entities impacted by the initial margin (IM) model authorization regime under the forthcoming EMIR 3 framework. Responses are due by Friday, November 29, 2024.

EMIR 3 introduces significant updates, including:

  • Authorization requirements for IM models used by EU counterparties
  • A new EBA central validation function for standardized margin models (e.g., ISDA SIMM)
  • Enhanced IM model supervision, with a focus on larger counterparties

The survey seeks general and specific information on IM models, margins, and fee-relevant data. Insights from the survey will assist the EBA in establishing its central validation function, developing fee-related regulations, and formulating proportionate requirements for smaller entities under EMIR 3.

EBA launches consultation on draft standards for structural FX - 28 October 2024

The European Banking Authority (EBA) has opened a public consultation on draft Regulatory Technical Standards (RTS) and Implementing Technical Standards (ITS) under the Capital Requirements Regulation (CRR) to improve clarity in structural FX practices across the EU. This consultation, running until 7 February 2025, focuses on setting uniform guidelines for structural FX. The RTS introduce quantitative thresholds to standardize currency eligibility for structural FX treatment, aim to streamline maximum open position calculations by prioritizing credit risk, clarify risk position adjustments, and establish policies for illiquid currencies. Meanwhile, the ITS propose a reporting template to monitor Structural FX waivers. These changes are designed to reduce inconsistencies and enhance transparency in managing structural FX across EU institutions.

 

European Securities and Market Authority

ESMA publishes quarterly bond liquidity assessment and systematic internaliser data - 31 October 2024

The European Securities and Markets Authority (ESMA) has released its quarterly liquidity assessment for bonds and systematic internaliser data under MiFID II and MiFIR. For this period, 1,233 bonds meet liquidity requirements, with transparency obligations applying from 18 November 2024 to 16 February 2025. ESMA also published trading data for over 25,000 equity instruments, 146,000 bonds, and various derivative subclasses, with SI testing required by 15 November 2024. The complete data is accessible through ESMA’s Financial Instruments Transparency System (FITRS).

ESMA to directly supervise two data reporting service providers in 2025 - 31 October 2024

The European Securities and Markets Authority (ESMA) announced it will directly supervise Wiener Börse AG and KELER Központi Értéktár Zrt starting 1 June 2025. These entities, currently supervised at the national level, failed to meet ESMA’s derogation criteria for the second consecutive year. The criteria assess the entities' market relevance and are reviewed annually.

ESMA consults on prospectus regulation and liability under the listing act - 28 October 2024

The European Securities and Markets Authority (ESMA) has released a Consultation Paper on technical advice for the Prospectus Regulation and a Call for Evidence on Prospectus Liability. The proposals aim to ease regulatory burdens and improve data reporting, especially for non-equity securities with ESG features. The Listing Act also prompts ESMA to assess and potentially harmonize liability standards for prospectus information to enhance transparency and investor protection in public listings.

 

Bank of England

Bank rate reduced to 4.75% - 07 November 2024

The Monetary Policy Committee (MPC) of the Bank of England reduced the Bank Rate by 0.25 percentage points to 4.75% on 6 November 2024. This decision follows continued progress in disinflation, although domestic inflationary pressures remain slow to resolve. CPI inflation fell to 1.7% in September but is expected to rise to around 2.5% by year-end. The MPC forecasts inflation will return to the 2% target in the medium term, with GDP growth expected to remain modest. The MPC also remains cautious about the labour market, with uncertainties around wage growth and the impact of the Autumn Budget measures. A gradual approach to policy tightening is expected to continue.