Insights

In this issue:

• EBA consults on Revised Guidelines on Deposit Guarantee Schemes Stress Tests
• EBA publishes report on LCR implementation in the EU
• EU Commission proposes roadmap for instant payments scheme
• EBA consults on Credit Institution Authorisation
• Updates on Sustainable Finance Reporting by Public Interest Company
• Cessation of LIBOR and Transition
• ECB publishes guidelines on method of determining penalties for regulatory breaches
• EBA publishes consultation paper on ESG Risks
• ESMA publishes Guidelines on disclosure requirements under the Prospectus Regulation

EBA consults on Revised Guidelines on Deposit Guarantee Schemes Stress Tests

The EBA has published a consultation paper aimed at replacing the existing Guidelines on stress tests of Deposit Guarantee Shemes (DGS). The proposed revised guidelines aim to extend the scope of DGS stress testing and also seek to achieve a greater degree of harmonisation and comparability, allowing the EBA to carry out a robust peer review of national DSG stress tests in 2024/2025.

The consultation period will run until 11 June 2021.

Link to press release

EBA publishes report on LCR implementation in the EU

The EBA has published its second report on the monitoring of the liquidity coverage ratio (LCR) within the EU. The report discusses matters such as the treatment of fiduciary deposits, and LCR optimisation risk. It also highlights certain points in view of the COVID-19 pandemic, such as the usage of liquidity buffers and the guidance on unwinding mechanism waivers.

Link to press release

EU Commission proposes roadmap for instant payments scheme

The EU Commission has launched an inception impact assessment laying out its roadmap for its proposal for a Regulation on an EU-wide instant payments scheme.

The Commission has proposed both legislative and non-legislative policy options intended at achieving the initiation and acceptance of instant payments domestically and cross-border. The roadmap includes number of possible policy options such as the baseline option of monitoring the market evolution and assessing the effects of voluntary efforts, as well as non-legislative and legislative options. Non-legislative options would consist of the promotion of voluntary participation of payment service providers, such as the relevant standardisation processes or schemes, while the legislative option would consist of ‘enabling’ legislative measures.

Comments on the roadmap may be submitted up to 7 April 2021.

Link to roadmap

EBA consults on Credit Institution Authorisation

Pursuant to Article 8(5) of the Capital Requirements Directive (CRD), the EBA has launched a consultation paper aimed at establishing a common assessment methodology for granting authorisations for credit institutions.

The proposed guidelines drafted by the EBA, advocate for a risk-based approach and stress the importance of consistency with the supervisory approaches applied in going concern situations.

The proposed guidelines also provide guidance on money laundering and terrorist financing, highlighting importance of cooperation with the anti-money laundering (AML) supervisor and other public bodies, in accordance with the CRD.

The consultation period will run until 10 June 2021.

Link to guidelines

Updates on Sustainable Finance Reporting by Public Interest Company

The MFSA has published a Circular aimed at informing Financial Market Participants and Financial Advisors with the recent developments on sustainable finance reporting.

The Circular deals extensively with the obligations arising out of Article 8 of the Sustainable Finance Taxonomy Regulation, and the steps that the EU Commission is taking in ensuring its implementation. As the Circular explains, the Commission has called upon the three ESAs on advice on the implementation of this article. In turn, a consultation paper has been published by the three ESAs to seek the views of stakeholders on a proposal for the advice to be given to the Commission. The MFSA’s Circular also includes a brief summary of the feedback received.

Link to circular

Cessation of LIBOR and Transition

The MFSA has published a Circular reporting on the future cessation of LIBOR or loss of representativeness of the 35 LIBOR benchmark settings.

Going forward, the FCA has announced a number of consultations that will be conducted such ad, requiring IBA to continue publishing the 3 remaining sterling LIBOR settings for a further period after end-2021 on a changed methodology, requiring IBA to continue publishing the 1-month, 3-month and 6-month Japanese yen LIBOR settings after end-2021 on a synthetic basis, for one additional year and monitoring the possibility of requiring IBA to continue publishing on a synthetic basis the 1- month, 3-month and 6-month US dollar LIBOR settings for a further period after end-June 2023.

Link to circular

ECB publishes guidelines on method of determining penalties for regulatory breaches

On 2 March 2021, the ECB published a Guide to the method of setting administrative pecuniary penalties, outlining the manner in which penalties for regulatory breaches are to be calculated.

The guide holds that the ECB sets the level of a penalty in relation to the severity of the breach and, in order to ensure proportionality, also to the size of the supervised entity. Breaches are classified into one of five categories, minor, moderately severe, severe, very severe and extremely severe.

The factors which determine in which category a breach falls into are twofold, the impact of the breach and the degree of misconduct.

Link to press release

EBA publishes consultation paper on ESG Risks

The Capital Requirements Regulation (CRR) requires that large institutions with listed securities disclose prudential information on their ESG (Environmental, social and governance) risks.

To this end, the EBA has published a consultation paper on the draft implementing technical standards (ITS) as to how the ESG risks are to be disclosed. The draft ITS treats matters such as risk disclosures, mitigation measures, Green asset ratio (GAR) and qualitative information on ESG.

In its press release, the EBA stressed the need to have such risks disclosed, holding that they are a vital tool in promoting market discipline and allowing stakeholders to assess banks’ ESG related risks and sustainable finance strategy.

The consultation period will run until 1 June 2021.

Link to press release

ESMA publishes guidelines on disclosure requirements under the Prospectus Regulation

The ESMA has published guidelines on disclosure requirements under Regulation (EU) 2017/1129 of the European Parliament and of the Council of 14 June 2017 on the prospectus to be published when securities are offered to the public or admitted to trading on a regulated market, and repealing Directive 2003/71/ECText with EEA relevance. (the Prospectus Regulation)

The guidelines are amended at helping market participants comply with the disclosure requirements under the Prospectus Regulation and to promote the harmonised application of disclosure requirements across the EU.

The guidelines will start applying from two months after the date of their publication on ESMA’s website in all official languages of the EU.

Link to guidelines