EU Regulatory update - February 2022

EBA to run EU-wide stress test for banks in 2023

On 17 December 2021, the EBA published a press release announcing that it will run its next EU-wide stress test for banks in 2023. In 2022, the EBA will perform its regular annual transparency exercise.

The EU-wide stress test for banks is used to assess their resilience to adverse economic and market developments and contributes to the assessment of systemic risk in the EU financial system.

ESRB report - CRR, CRD, BRRD - overlap between capital buffers and minimum requirements for banks

In December 2021, the European Systemic Risk Board (ESRB) published a report on the overlap between capital buffers and minimum requirements for EU credit institutions.

The ESRB considers the interaction between capital buffers and the various minimum requirements set out in the Capital Requirements Regulation (CRR), the CRD IV Directive and the Bank Recovery and Resolution Directive (BRRD). The ESRB notes that empirical results highlight the fact that buffer usability may be restricted in certain regions and countries and for certain banks, which might, in turn, limit the extent to which macroprudential buffers would absorb losses and support the provision of key services in a downturn. While recognising the advantages of a multi-restrictive framework, the report notes that policymakers need to be aware of the implications of these parallel requirements for buffer usability.

Payment Accounts Directive (PAD) - negative interest rates and “fees” under PAD

In a letter from the European Commission to the Danish Financial Supervisory Authority (DFSA), dated 13 January 2022, the European Commission considers the DFSA’s request for a view on the compatibility of the PAD and charging of negative interest rates on payment accounts.

In conclusion to the letter, the European Commission “leans towards” a conclusion that negative interest rates are not to be considered as “fees” in the sense of PAD and so do not need to comply with the “reasonableness” criteria in Article 18. However, the European Commission notes that the final assessment of this question and the final interpretation of PAD would lie with the European Court of Justice.

Payment Services Directive (PSD2) – payment fraud data

On 17 January 2022, the EBA published a discussion paper on its preliminary observations on selected payment fraud data under PSD2, as reported by the industry for 2019/20. PSD2 requires all payment service providers in the EU to report payment fraud to national competent authorities (NCAs), and for NCAs then to provide the EBA and the European Central Bank (ECB) with statistical data on fraud relating to different means of payment.

The paper sets out the main findings relating to three payment instruments (credit transfers, card-based payments and cash withdrawals) and patterns that can be derived from that dataset. The paper also highlights other patterns that appear not to be immediately intuitive and that cannot be plausibly explained by the EBA and the NCAs, and for which the comments from market stakeholders, the EBA notes, would be particularly beneficial.

Comments can be submitted until 19 April 2022.

Financial conglomerates – ESA list of identified financial conglomerates for 2021

The European Supervisory Authorities new 2021 list of financial conglomerates has been published and can be found here. The list includes 66 financial conglomerates with the head of group located in the European Union or European Economic Area, one financial conglomerate with the head of group in Switzerland and one in the United Kingdom.

“De-risking” – EBA report

On 5 January 2022 the EBA published an opinion on de-risking. ‘De risking’ is where a financial institution takes a decision to refuse to enter into, or to terminate, business relationships with individual customers or categories of customers associated with higher ML/TF risk, or to refuse to carry out higher ML/TF risk transactions.

The EBA notes that while decisions not to establish or to end a business relationship, or not to carry out a transaction, may be in line with Article 14(4) of Directive (EU) 2015/849 (AMLD), de-risking of entire categories of customers, without due consideration of individual customers’ risk profiles, can be unwarranted and a sign of ineffective ML/TF risk management.

From information gathered by the EBA from national competent authorities and external stakeholders in 2020-21, the EBA assessed whether it should take additional steps to complement existing EBA legislation to address unwarranted de-risking. This opinion sets out those additional steps, including that:

• The European Commission should clarify the relationship between provisions in the Payment Accounts Directive (PAD), the revised Payment Services Directive (PSD2) and the EU's anti-money laundering and counter-terrorism financing (AML/CTF) frameworks.
• Competent authorities should engage more actively with institutions that de-risk and with users of financial services that are particularly affected by de-risking to raise awareness of the rights and responsibilities of institutions and their customers and set out in practical terms what each can do to facilitate legitimate customers' access to financial services.
• Competent authorities should remind financial institutions that, if this is warranted by the outcome of their assessment of ML/TF risk associated with a customer, they can opt to offer only basic financial products and services to these customers.

Single Resolution Board (SRB) highlights priorities for 2022

The SRB published a blog on 10 January setting out its priorities for 2022. Three key priorities were highlighted:

• Minimum requirements for own funds and eligible liabilities (MREL) build up. The SRB expects most banks under its remit to respect the January 2022 intermediate MREL target. All banks are encouraged to continue to build up their MREL. The SRB notes that banks know the requirements they must fulfil until 2024 and it is up to them to decide on buffers to keep them safe.
• Separability and reorganisation plans. For mid-sized banks, the SRB is prioritising the work on transfer tools, separability and adjustments of MREL for these transfer tools. "Sale of business" is one of the SRB's tools. The SRB makes note of the guidance note on separability it issued in 2021 and confirms it will continue to work on this area in 2022.
• Information systems and management information (MI) systems. The SRB notes that the COVID pandemic has brought about considerable advances in this area. While some banks have stepped up their efforts, others are still lagging behind. The SRB has observed banks' reorganisation efforts become more efficient and customer-focused. IT and cyber risks and their management (particularly regarding the timely availability of data), must be a key priority for banks and will benefit resolution planning and crisis preparedness.

The SRB also notes that it has defined a heat-map on assessing resolvability, designed as a tool to monitor, benchmark and communicate banks' progress towards full resolvability.

UK CCPs – ESMA assessment report

On 17 December 2021, ESMA published an assessment report, divided into Part one and Part two, on systemically important third-country central counterparties (Tier 2 CCPs) established in the UK and the risks they may pose to the financial stability of the EU. ESMA’s conclusions are also summarised in a statement.

ESMA identified three UK CCPs, one provided by LCH Ltd and two by ICE Clear Europe Ltd, as Tier 2 CCPs. ESMA concludes that it will not recommend to the European Commission to derecognise a Tier 2 CCP, or one of its services, at this point in time. Instead, ESMA is proposing that measures be considered by the relevant EU institutions and authorities to mitigate risks related to the Tier 2 CCP clearing services that have been identified as being of substantial systemic importance for the EU.

EMIR - ESMA consults on review of RTS on anti-procyclicality margin measures for CCPs

On 27 January 2022, ESMA published a consultation paper on regulatory technical standards (RTS) with respect to procyclicality of margin requirements for CCPs under EMIR. The consultation closes on 31 March 2022.

CCPs mandatory buy-in regime under Short Selling Regulation (SSR)

CCPs are currently required under the SSR to include a buy-in regime in their operating rules, but this requirement is meant to be repealed upon the application of the CSDR buy-in regime. However, as set out in our briefing at the end of November, EU legislators agreed on the postponement of the CSDR mandatory buy-in rules from their planned 1 February 2022 implementation date.

In the light of this, in a statement published by ESMA, amongst other things, ESMA requests NCAs to encourage CCPs to continue applying the buy-in rules currently implemented by them until the application of the revised CSDR buy-in regime.

Mandatory buy-in regime

As set out in our briefing at the end of November EU legislators agreed on the postponement of the mandatory buy-in rules from their planned 1 February 2022 implementation date.

On 17 December 2021, ESMA published a statement in which it refers to the postponement, while noting the importance of the entry into force of the rest of the settlement discipline regime measures (settlement fails reporting and cash penalties) on 1st February 2022 as planned.

Given that the regulatory process involved in formalising this postponement amendment will take some time (and will go beyond 1 February 2022), ESMA states that it expects national competent authorities (NCAs) not to prioritise supervisory actions in relation to the application of the CSDR buy-in regime.

In addition, the Short Selling Regulation (SSR) currently requires CCPs to include a buy-in regime in their operating rules, but this requirement is meant to be repealed upon the application of the CSDR buy-in regime. In the light of this, ESMA expects NCAs to encourage CCPs to continue applying the buy-in rules currently implemented by them until the application of the revised CSDR buy-in regime.

To read about more about the CSDR settlement discipline regime and what you should be doing from 1 February 2022, read our briefing here.

CSDR – ESMA Q&A updates

On 17 December 2021, ESMA published an updated version of its Q&As on the implementation of the Central Securities Depositories Regulation (CSDR).

DLT pilot regime – compromise text published

The DLT pilot regime lays down the conditions for acquiring permission to operate a DLT market infrastructure, defines which DLT financial instruments can be traded and details the co-operation between the operators of DLT market infrastructures, national competent authorities and ESMA.

On 21 December 2021, the Council of the EU published a note dated 16 December 2021 attaching the final compromise text of the proposed Regulation on a pilot regime for market infrastructures based on distributed ledger technology (DLT). This follows the Council and the European Parliament reaching political agreement on the proposed Regulation on 24 November 2021, which we reported on in our briefing here.

The Council has also published a press release which confirms that the Council's Permanent Representatives Committee (COREPER) has endorsed the political agreement.

The next step is for the proposed Regulation to be formally adopted by the Council and the Parliament. The Regulation will enter into force 20 days after it is published in the Official Journal of the European Union and will apply nine months after the date it has entered into force.

DLT pilot regime and MiFIR pre- and post-trade transparency – call for evidence

On 4 January ESMA published a call for evidence on distributed ledger technology (DLT) on the need to amend the Regulatory Technical Standard (RTS) on MiFID pre- and post-trade transparency requirements.

The DLT pilot regime (see above) requires ESMA to assess whether the regulatory technical standards (RTS) developed under MiFIR relative to certain pre- and post-trade transparency and data reporting requirements need to be amended to being effectively applied also to securities issued, traded and recorded on DLT.

The call for evidence seeks input from stakeholders on the use of DLT for trading and settlement and on the need for amending the regulatory technical standards (RTS) on regulatory reporting and transparency requirements.

Comments are to be submitted by 4 March 2022. For further details about the DLT pilot regime, see above.

DLT pilot regime and CSDR mandatory buy-in regime

On 17 December 2021, ESMA published a statement on its approach to the implementation of buy-in provisions under Article 7 of the Central Securities Depositories Regulation (CSDR) and Articles 21 to 28 of Commission Delegated Regulation (EU) 2018/1229 (RTS on Settlement Discipline).

Amongst other things, it notes that the co-legislators have agreed on an amendment to the CSDR, introduced via the proposed DLT Pilot regime, which will allow the decoupling of the date of application of the buy-in regime from the provisions on penalties and reporting. This amendment will allow ESMA to develop draft technical standards to postpone the application of the buy-in regime.

However, ESMA is aware that the DLT pilot regime is not expected to enter into force before the application date of the settlement discipline regime. Therefore, based on the assumption that the decoupling of the application dates of settlement discipline measures will eventually be allowed, ESMA states that it considers it important to take into account this likely upcoming legislative change when applying the CSDR settlement discipline regime until the postponement of the buy-in regime is formally in place.

It therefore expects national competent authorities (NCAs) not to prioritise supervisory actions in relation to the application of the CSDR buy-in regime.

AIFMD – ESMA updates Q&A in respect of crypto assets

On 17 December 2021, ESMA updated its Q&As on the Application of the AIFMD by including a question asking whether managers of undertakings investing in crypto-assets are subject to the AIFMD. See our briefing here for more details.

Digitalisation and marketing - International Organization of Securities Commissions (IOSCO) consultation paper published

An IOSCO consultation paper was published om 17 January 2022 on measures to address risks arising from digitalisation of retail marketing and distribution. The consultation paper notes the rapid growth in digitalisation and use of social media is changing the way financial products are marketed and distributed.

Whilst online domestic and cross border offerings of financial services and products provide new opportunities for firms to reach potential clients and for investors to access to financial products, it also brings with it new risks – in particular in the retail OTC leveraged product sector.

The consultation paper analyses the developments in online marketing and distribution of financial products to retail investors in IOSCO member jurisdictions, both domestically and on a cross-border basis. It presents proposed toolkits of policy and enforcement measures. The policy and enforcement toolkits include seven and five measures, respectively, that would help in addressing the issues and risks associated with online marketing and distribution.

Comments are to be provided by 17 March.

Digital company law: European Commission consults on future legislative initiative upgrading digital company law

Following an Inception Impact Assessment Roadmap on 20 July 2021, announcing the adoption of a legislative proposal upgrading digital company, the European Commission on 21 December 2021 launched a public consultation requesting feedback.

The consultation relates to ongoing digital transition of the economy and society which has substantial impacts on companies, including small and medium-sized companies (SMEs). More recently, the COVID-19 pandemic showed clearly that digital tools are essential to ensure the continuity of business operations and interactions with authorities on company law related issues. While Directive (EU) 2019/1151 (Digitalisation Directive) provided the first step in advancing digital tools and procedures in company law (e.g. by providing for fully online creation of companies, registration of branches and filing with business registers) and is currently being transposed, the Commission notes that there is more to be done. In this context, the new initiative on “Upgrading digital company law” aims to further adapt EU company law to the continuing digital developments. This initiative will represent the second step in the digitalisation of company law and will build on and complement the 2019 Digitalisation Directive

The feedback period for the public consultation runs until 8 April 2022. The proposal for a Directive is expected to be adopted in Q4 of 2022.

Crowdfunding Regulation – updated ESMA Q&As

In January ESMA published an updated version of it Q&As on this topic.

Cyber-risk - ESRB recommendation on establishing pan-European systemic cyber incident co-ordination framework

On 27 January 2022, the European Systemic Risk Board (ESRB) published a recommendation on the establishment of a pan-European systemic cyber incident co-ordination framework. The driver is the ESRB’s concern that the constantly evolving cyber threat landscape and recent increase of major cyber incidents are indicators of greater risk to financial stability in the EU.

The overall intention is to encourage swift co-ordination and communication between EU authorities. This builds on one of the roles of the European Supervisory Authorities (ESAs) under the proposed EU Regulation on digital operational resilience for the financial sector (DORA) of building an effective EU-level co-ordinated response in the event of a major cross-border information and communication technologies (ICT) related incident or related threats having a systemic impact on the EU's financial sector.

The ESRB has also published a report on mitigating systemic cyber risk.

Crypto View

For more timely updates on the world of digital assets, take a look at our Crypto View.

Webinar: Keeping up with crypto (10 February, 11:00-12:15 EST / 16:00-17:15 GMT / 17:00-18:15 CET)

Join our webinar co-hosted with Holland & Knight as we discuss the latest direct and indirect tax, compliance and enforcement initiatives in the US, UK and EU. Please see this site for further information and to register your attendance.

Taxonomy Regulation – Delay on gas and nuclear proposals

On 24 January, the Platform on Sustainable Finance (PSF) provided feedback to the EU Commission on its gas and nuclear proposals in relation to the Taxonomy Regulation.

By way of background in December, the Climate Delegated Regulation was published in the OJ. This specifies the criteria to be used to determine:

• which specific economic activities qualify as 'contributing substantially' to the environmental objectives of climate change adaptation and mitigation; and
• whether those economic activities cause significant harm to any of the other relevant environmental objectives.

The Delegated Regulation, however, did not cover gas and nuclear activities.

To resolve this the EU Commission drafted a separate Complementary Delegated Act (CDA) and requested feedback from two expert groups - Platform on Sustainable Finance (PSF) and the Member States Expert Group on Sustainable Finance (EGSF). This is a required process before the CDA can proceed to be considered by the EU Parliament and Council.

Overall the PSF’s response was critical of the Commission’s draft CDA. You can read more in our briefing.

Taxonomy Regulation – FAQs on Article 8 Disclosure Obligation

On 20 December 2021, the Commission published a set of FAQs designed to assist entities in making disclosures under Article 8 of the Taxonomy Regulation. Read our briefing here.

ECB Climate risk stress test launched

On 27 January 2022, the European Central Bank (ECB) published a press release announcing the launch of its 2022 climate risk stress test. The supervisory climate risk stress test is intended to assess how prepared banks are for dealing with financial and economic shocks stemming from climate risk. The exercise will be conducted in the first half of 2022 after which the ECB will publish aggregate results.

This test will use macro-financial scenarios based on scenarios prepared by the Network of Central Banks and Supervisors for Greening the Financial System. These reflect possible future climate policies and assess both physical risks, such as heat and droughts and floods, and short and long-term risks stemming from the transition to a greener economy.

From March 2022, banks will be required to submit their climate risk stress test templates to the ECB for assessment. The supervisor will subsequently engage with the banks, provide feedback and ensure fair and consistent outcomes.

EU Single Rulebook – responses to EU Commission’s consultation published

On 17 January 2022, the European Commission published its report setting out a summary of responses to its March 2021 consultation paper on supervisory convergence and the single rulebook.

ESRB recommendation on establishing pan-European systemic cyber incident co-ordination framework

On 27 January 2022, the European Systemic Risk Board (ESRB) published a recommendation on the establishment of a pan-European systemic cyber incident co-ordination framework. The driver is the ESRB’s concern that the constantly evolving cyber threat landscape and recent increase of major cyber incidents are indicators of greater risk to financial stability in the EU.

The overall intention is to encourage swift co-ordination and communication between EU authorities. This builds on one of the roles of the European Supervisory Authorities (ESAs) under the proposed EU Regulation on digital operational resilience for the financial sector (DORA) of building an effective EU-level co-ordinated response in the event of a major cross-border information and communication technologies (ICT) related incident or related threats having a systemic impact on the EU's financial sector.

The ESRB has also published a report on mitigating systemic cyber risk.

EBA confirms continued application of guidelines on reporting and disclosure requirements

Following the uncertainty over COVID-19 developments, the European Banking Authority (EBA) has confirmed the need to continue monitoring exposures and the credit quality of loans benefitting from various public support measures. To facilitate such monitoring, the Guidelines on the reporting and disclosure of exposures subject to measures applied in response to the COVID-19 crisis continue to apply until further notice.

Non-Performing Loans (NPLs)

Preventing systemically-critical NPL volumes has and remains a key priority for the EU. The EU Commission issued an Action Plan on preventing NPLs in December 2020. It is to be expected that the EU will increase the pressure on banks to proactively reduce NPL volumes. With Covid-related State aid programmes slowly coming to an end a rise in NPLs remains a concern.

Read our briefing for a detailed analysis on the future of the EU NPL Market.

IOSCO – Operational Resilience of Trading Venues and Market Intermediaries during the Pandemic

On 13 January 2022, the International Organization of Securities Commissions (IOSCO) published a consultation report seeking feedback on the lessons learned from the operational resilience of trading venues and market intermediaries during the COVID-19 pandemic.

The report concludes that trading venues and market intermediaries (referred to collectively in the report as regulated entities) have largely proved operationally resilient during the pandemic. It summarises the operational resilience work of IOSCO and other organisations, outlines how the pandemic impacted regulated entities, examines the key operations risks and challenges faced by regulated entities, and sets out principles and guidance to inform regulated entities’ future operational resilience arrangements. The report seeks feedback on these points.

The deadline for responses is 14 March 2022.

ESMA launches CSA on valuation of UCITS and open-ended AIFs

On 20 January 2021, ESMA announced that it was launching its third asset management-related Common Supervisory Action (CSA) with National Competent Authorities (NCAs). The new CSA will focus on the valuation of UCITS and open-ended AIFs across the EU.

For more information about this announcement, read our briefing.

UCITS Q&A update - issuer concentration and advance notice for cross-border marketing of new share classes

On December 17 ESMA updated its UCITS Q&As in respect of issuer concentration and advance notice for cross-border marketing of new share classes of UCITS. Read our briefing here.

Money Market Funds (MMFs) – ESRB recommendation to increase resilience of MMFs

On 25 January 2022, the European Systemic Risk Board (ESRB) published a recommendation (dated 2 December 2021) to the European Commission on the reform of money market funds (MMFs). It also published a related press release.

The ESRB recommends that:

• LVNAV MMFs should have fluctuating NAVs and no collar in order to reduce threshold effects that increase first-mover advantages.
• MMFs diversify asset portfolios and improving their liquidity through requirements to hold public debt assets and by making sure that such liquidity can be used when needed
• The use of liquidity management tools that impose trading costs on redeeming and subscribing investors is facilitated. As such the constitutional documents of MMFs should contain at least one of three liquidity management tools (LMTs): anti-dilution levies, liquidity fees and swing pricing for MMFs with a fluctuating NAV.
• monitoring and stress testing frameworks should be enhanced.

The ESRB requests the Commission to submit a communication on the actions undertaken in response to the recommendation by 31 December 2023.

AIFMD – ESMA updates Q&A in respect of crypto assets

On 17 December 2021, ESMA updated its Q&As on the Application of the AIFMD by including a question asking whether managers of undertakings investing in crypto-assets are subject to the AIFMD. See our briefing here for more details.

Reverse Enquiry – new reporting requirement?

On 17 December 2021, ESMA sent a letter to the European Commission regarding reverse enquiry in the context of the Cross-Border Funds Distribution (CBFD) regime. This was in reply to the Commission’s letter of 24 September 2021.

Whilst the letter contains little concrete information, it contains a suggestion from ESMA that putting in place a reporting regime might assist the collection of information on reverse solicitation across the EU.

This has, understandably, created some noise in the market. See our briefing for a more detailed discussion on this hot topic.

ESMA published, on 5 January, its final report on its amended Guidelines on delayed disclosure under MAR, adding certain cases to the list of legitimate interests of issuer for delaying public disclosure of insider information.

A translation procedure will follow and the guidelines will be applicable 2 months after the publication of translations.

Appropriateness and Execution Only - Final Report on Guidelines

ESMA published, on 3 January, its final report on its Guidelines on certain aspects of the MiFID II appropriateness and execution-only requirements. The Guidelines cover several important aspects of the appropriateness process, spanning from the information to be provided to clients about the purpose of the appropriateness assessment, the arrangements necessary to understand clients and products, to the matching of clients with appropriate products and the effectiveness of warnings. In addition, other related requirements are clarified, such as the execution-only exemption and record-keeping and controls.

Suitability Guidelines – ESMA consultation

On 27 January 2022, ESMA published a consultation paper with a view to updating its November 2018 Guidelines on certain aspects of the MiFID II suitability requirements.

The ESMA consultation closes on 27 April 2022.

Read our briefing here.

Trading Venues perimeter and multilateral systems definition – ESMA consultation

On 28 January 2022, ESMA published a consultation paper to assist it in producing an opinion to clarify provisions in MiFID II relating to multilateral systems and the perimeter for trading venue authorisation.

By way of background, following the publication of ESMA’s final report on the functioning of Organised Trading Facilities (OTFs), ESMA committed to publish an opinion clarifying the definition of multilateral systems and the trading venue perimeter, i.e. providing guidance on when systems should be considered as multilateral systems and seek authorisation as trading venues. This Consultation Paper aims at gathering views from stakeholders on ESMA’s analysis.

The consultation closes on 29 April 2022. ESMA expects to publish a final report by the end of Q3 2022.

ESMA Q&As on transparency

On 28 January 2022, ESMA published an updated version of its Q&As on MiFIDII/MiFIR transparency topics.

The updated Q&As include a new Q&A on the responsibility to verify the double volume cap (DVC) under Article 5 of MiFIR.

Updated list of high-risk third countries

On 7 January 2022, the European Commission adopted a Delegated Regulation amending the list of high-risk third countries with strategic anti-money laundering (AML) and counter-terrorist financing (CTF) deficiencies produced under Article 9(2) of MLD4. This will amend the Annex to MLD4. The list of countries is amended periodically to take account of information from international organisations and standard setters in the field of AML/CFT, such as the Financial Action Task Force (FATF).

Countries added to the list are Burkina Faso, Cayman Islands, Morocco, Senegal, Haiti, the Philippines, South Sudan, Jordan and Mali.

Countries removed from the list are Ghana, Botswana, Mauritius, the Bahamas and Iraq.

The Delegated Regulation also outlines the steps being taken by Turkey to address the strategic deficiencies in its AML/CTF regime. In the light of the progress it has made, the Commission has decided that there is no need to adopt further measures against Turkey under Article 9 at this stage.

The Delegated Regulation will be submitted to the Council of the EU and the Parliament to consider for approval. If neither objects, it will enter into force 20 days after it is published in the Official Journal of the European Union.

EBA new AML and CFT central database EuReCA

On 31 January 2022, a press release issued by the EBA announced the launch of its anti-money laundering (AML) and countering financing of terrorism (CFT) central database (referred to as EuReCA).

EuReCA will contain information on material weaknesses in individual financial institutions in the EU identified by competent authorities. Competent authorities will also report the measures they have imposed on financial institutions to rectify those material weaknesses. Examples of material weaknesses include inadequate AML and CFT policies and procedures including the absence of transaction monitoring at group level and the absence of policies and procedures for high-risk customers. EuReCA also includes internal audit findings identified by a prudential authority during an on-site inspection about which the management body of the senior management appeared to have been informed and decided not to remediate.

The EBA will use information from EuReCA to inform its view of AML and CFT risks affecting the EU financial sector. It will also share information from EuReCA with competent authorities should specific AML and CFT risks or trends emerge.

This follows the EBA’s published final report and draft regulatory technical standards (RTS) on EuReCA in December 2021.

EuReCA will not start to collect personal data until the approval of the draft RTS by the European Commission.

Public hearing

The European Supervisory Authorities (ESAs) will hold a public hearing on 11 February to discuss preliminary views gathered from the feedback to its call for evidence and to address areas to be addressed in the ESA’s final advice.

For further details on the points covered in the call for evidence, see our briefing here.

Registrations are open until Friday 4 February 2022 at 12:00 CET.

KID Q&As

On 17 December 2021, the Joint Committee of the European Supervisory Authorities (ESAs) (i.e. EBA, EIOPA and ESMA) published an updated version of its Q&As on the key information document (KID) requirements for PRIIPs.

On 21 January 2022, the European Banking Authority (EBA) published a number of consultation papers on its “guidelines on remuneration and gender pay gap benchmarking” and data collection.

• Consultation Paper – Guidelines under CRD IV containing the EBA’s proposed update to its “guidelines on remuneration and gender pay gap benchmarking” (first published in 2012, updated in 2014). The proposals take account of additional requirements introduced by CRD V (Directive (EU) 2019/878) regarding derogations to the requirement to pay out a part of variable remuneration in instruments and under deferral arrangements, and the benchmarking of the gender pay gap. The proposals also seek to harmonise the benchmarking of approvals granted by shareholders to use higher ratios than 100% between the variable and fixed remuneration.
• Consultation paper – Guidelines under IFD containing the EBA’s proposed update to its "guidelines on the benchmarking exercises on remuneration practices and the gender pay gap under Article 34(2) of the Investment Firms Directive ((EU) 2019/2034) (IFD). The draft Guidelines take into account the current ‘EBA Guidelines on the remuneration benchmarking exercise’ under CRD and the amendments made to them in the above consultation paper (bullet point above)
• Consultation paper – data collection on high earners under CRD and IFD containing the EBA’s proposed update to its “guidelines on the data collection exercises regarding high earners” under CRD and IFD. The draft guidelines reflect the amended remuneration framework set out in the CRD V Directive, in particular the introduction of derogations to pay out a part of the variable remuneration in instruments and under deferral arrangements. The guidelines have also been updated to reflect the specific remuneration regime that has been introduced for investment firms under the IFD and the Investment Firms Regulation ((EU) 2019/2033) (IFR). The establishment of these two distinct regulatory frameworks has required a separation of the data collection on high earners in credit institutions and investment firms. The templates and instructions have been updated accordingly and specific templates for investment firms have been introduced.

These proposals are intended to allow regulators to monitor the implementation of the already published EBA Guidelines on sound remuneration policies under CRD and IFD.

For more information on the Guidelines on sound remuneration policies, see our briefings here and here.

The new reporting format is expected to apply for the collection of data in 2023 for the financial year 2022. The first data on the gender pay gap will be collected in 2024 for the financial year 2023.

The EBA plans to hold a public hearing on the draft guidelines on 17 February 2022. Comments can be made on the proposals until 21 March 2022.

Read our summary of the current crisis on Ukraine’s border which may lead to unprecedented sanctions being imposed on Russia.

0.1% NSP permanent threshold now in place

From 31 January 2022 onwards, the net short position (NSP) notification threshold is lowered from to 0.1%. This amendment operates through a Delegated Regulation amending the SSR.

The 0.1% threshold was originally put in place as a temporary measure but ESMA recommended the adjustment of the threshold be made permanent in the light of the COVID-19 pandemic and the increased visibility obtained by competent authorities on volumes of net short positions.

CCPs mandatory buy-in regime

CCPs are currently required under the SSR to include a buy-in regime in their operating rules, but this requirement is meant to be repealed upon the application of the CSDR buy-in regime.

As set out in our briefing at the end of November, EU legislators agreed on the postponement of the CSDR mandatory buy-in rules from their planned 1 February 2022 implementation date.

In the light of this, in a statement published by ESMA, amongst other things, ESMA requests NCAs to encourage CCPs to continue applying the buy-in rules currently implemented by them until the application of the revised CSDR buy-in regime.

On 20 December 2020, the European Banking Authority (EBA) launched its consultation on draft Regulatory Technical Standards (RTS) specifying and, where relevant, calibrating the minimum performance-related triggers for simple, transparent and standardised (STS) on-balance-sheet securitisations that feature non-sequential amortisation.

A public hearing took place via conference call on 26 January 2022, and comments to the consultation can be made until 28 February 2022.

On 22 December 2021, the European Commission published a proposal for a directive laying down rules to prevent the misuse of shell entities for tax purposes, also known as Anti-Tax Avoidance Directive - ATAD 3.

Read our briefing here for further details about ATAD3.

January 2022 updates:

• SFTR - Q&As on complying with reporting requirements under the SFTR and amending the Q&A on reporting of settlement fails.
• MiFIDII / MiFIR - Q&As on MiFIDII/MiFIR transparency topics. The updated Q&As include a new Q&A on the responsibility to verify the double volume cap (DVC) under Article 5 of MiFIR.
• Benchmarks Regulation - updated version of ESMA’s Q&As on the Benchmarks Regulation (BMR). ESMA has updated the Q&As to add a new Q&A 8.6 on Requirements for users: temporary disruptions under Article 28(2) of the BMR
• Crowdfunding Regulation - updated version of ESMA’s Q&As.

December 2021 updates:

• AIFMD – Q&As on the Application of the AIFMD by including a question asking whether managers of undertakings investing in crypto-assets are subject to the AIFMD. See our briefing here for more details.
• UCITS - UCITS Q&As in respect of issuer concentration and advance notice for cross-border marketing of new share classes of UCITS. Read our briefing here.
• PRIIPs – updated version of ESMA’s Q&As on the key information document (KID) requirements for packaged retail and insurance-based investment products (PRIIPs).
• CSDR - updated version of ESMA’s Q&As on the implementation of the Central Securities Depositories Regulation (CSDR).