EU institutions financial regulatory priorities for 2023

Each year the key EU financial regulatory institutions publish their annual Work Programmes, setting out their priorities for the year ahead. These priorities align with each institution’s broader longer-term “Strategy” (published every 3-5 years).

We’ve summarised in the table below, at a snapshot, the key areas of focus, for the financial services sector, per published Work Programme/ Strategy. A more detailed summary for each Work Programme/Strategy can also be found further below.

Why is this important?

These short and longer term priorities are the areas in which we will likely see increased scrutiny and development in the financial services sector in 2023 and beyond at EU level and national level. It is, however, important to note that these priorities are not exhaustive.

Summary Table

¹ Comprised of the European Commission, EU Council and European Parliament.
² European Supervisory Authorities comprised of EBA, EIOPA, ESMA.

Key legislative bodies… more detail….

Joint Legislative Priorities

The European Commission, EU Council and European Parliament agreed on their joint legislative priorities for 2023, accompanied by a more detailed Work Programme. From a financial services perspective, the key priorities are:

• Further developing the Banking Package including regulation on credit risk, credit valuation adjustment risk, operational risk, market risk and the output floor, and a directive on supervisory powers, sanctions, third-country branches, and environmental, social and governance risks
• Revising the bank crisis management and deposit insurance framework
• Establishing a framework for the recovery and resolution of insurance and reinsurance undertakings
• EMIR targeted amendments to mitigate excessive exposures to third-country CCPs, improve the efficiency of EU clearing and the treatment of counterparty-concentration risk and CCP-concentration risk
• Proposed amendments to the Central Securities Depositories Regulation
• Improving the retail investment framework
• ESG developments including Corporate Sustainability Due Diligence Directive and European Green Bonds Regulation
• Development of a European Single Access Point (ESAP), providing centralised access to publicly available information of relevance to financial services, capital markets and sustainability
• Developing the Open Finance Framework
• Further developing the payments framework with proposals for instant credit transfers in Euros, a review of the Payment Services Directive (PSD2) and digital euro
• Proposed amendments to MiFID2 and MiFIR in relation to the consolidated tape
• Proposed amendments to AIFMD on delegation arrangements, liquidity risk management, supervisory reporting, provision of depositary and custody services and loan origination by alternative investment funds
• Further developing the AML framework including harmonising mechanisms to be used by member states to prevent money laundering and terrorist financing, and establishing a new EU Authority for Anti-Money Laundering and Countering the Financing of Terrorism

Key advisory and ancillary bodies…more detail….

The EBA, EIOPA and ESMA (jointly, the ESAs) perform various functions in the EU system including:

• providing advice to the EU legislative bodies;
• developing technical standards (e.g. Q&As and other guidance) to accompany published legislation, where they are given a mandate to do so by the legislative bodies; and
• co-ordinating with member state national regulators.

ESAs’ Priorities

The European Supervisory Authorities (ESAs) comprises the European Banking Authority (EBA), European Insurance and Occupational Pensions Authority (EIOPA) and European Securities and Markets Authority (ESMA)). The ESA’s intention is to foster cross-sectorial consistency and supervisory convergence by co-ordinating their work on specific priority areas.

The ESA’s joint priorities for 2023, as set out in their Work Programme, focus on:

• PRIIPS Regulation framework
• SFDR and ESG legislative frameworks
• Analysing the key trends and vulnerabilities to financial stability
• Securitisation Regulation framework
• Digital Operational Resilience including developing technical standards on ICT risk management framework and guidelines on the methodology for calculating costs, and quantifying losses for response and recovery
• External Credit Assessment Institutions (ECAIs) including production of mappings for newly registered ECAIs and monitoring of existing mappings. “Mapping” means mapping the correspondence between the relevant credit assessments issued by an ECAI to the Credit Quality Steps set out in the CRR.
• Financial Conglomerates will continue to be identified and listed, and technical standards for reporting templates will continue to be developed
• Fit and Proper Information Exchange System including developing joint guidelines and IT solution to enable sectoral and cross-sectoral exchange of information on the fit and proper assessments. It is expected to deliver both the joint guidelines and the IT solution by the end of 2023.
• Brexit monitoring will continue in relation to impact and potential issues related to investor protection, EU market integrity and financial stability

EBA’s Priorities

The European Banking Authority (EBA) works to ensure effective and consistent prudential regulation and supervision across the EU banking sector. In its Work Programme (which includes its strategic priorities for 2023-2025) it sets out the following priorities:

• Finalising outstanding Basel III reforms
• Running an enhanced EU-side stress test
• Implementing its Data Strategy (aimed at improving the way regulatory data is acquired, compiled, used, and disseminated to relevant stakeholders, and strengthening analytical capabilities). The EBA will leverage its EUCLID platform for this purpose.
• Digital Finance and delivering MiCA/DORA mandates. Both MiCA and DORA are expected to enter into force in 2023, while the date of application is anticipated for 1 January 2025 (albeit these dates are tentative and, in the case of MiCA, depend on the outcome of the legislative process). The EBA, together with the other ESAs (where necessary), will need to develop the vast policy work from MiCA and DORA in advance of the application date.
• Continuing the fight against money laundering and terrorist financing (AML)
• Execution of the ESG Roadmap

EIOPA’s Priorities

The role of the European Insurance and Occupational Pensions Authority (EIOPA) is to foster financial stability and confidence in the EU insurance and pensions markets. EIOPA’s Work Programme and its 2023-2026 strategy focus on:

• Sustainable finance. Contributing to building up sustainable insurance and pensions, including by addressing protection gaps, for the benefit of citizens and businesses.
• Digital transformation. Supporting the supervisory community and industry to mitigate the risks and seize the opportunities of the digital transformation, including by further promoting a data-driven culture.
• Supervision. Promoting sound, efficient and consistent prudential and conduct supervision throughout Europe, particularly in view of increased cross-border business.
• Policy. Delivering high-quality advice and other policy work taking into account changing and growing needs of society as well as the effects of new horizontal regulation.
• Financial stability. Further enhancing financial stability, with particular focus on the analysis of financial sector risks, vulnerabilities, and emerging threats.
• Internal governance. Being a model EU authority with high professional standards, cost-effective governance, and a positive reputation within the EU and globally.

ESMA’s Priorities

The role of European Markets Authority (ESMA) is to contribute to safeguarding the stability of the EU’s financial system by enhancing investor protection and promoting orderly markets. ESMA’s Work Programme and 2023-2028 Strategy focus on:

• Sustainable finance. Developing remaining technical standards under the Sustainable Finance Disclosure Regulation (SFDR) and work to better understand and fight against greenwashing.
• Facilitating technological innovation and effective use of data. Developing technical standards and guidelines in order to help the market prepare for the implementation of key new regulations in the area of digital finance: the Digital Operational Resilience Act (DORA), the Regulation on Markets in Crypto-Assets (MiCA) and the DLT Pilot Regime. Adapting to the digitalisation in financial markets by strengthening the single rulebook and by promoting supervisory convergence.
• Investors and issuers. Continuing to report on the impact of costs and charges for retail investors and coordinate new workstreams on mystery shopping. Coordinate a Common Supervisory Action (CSA) in the area of sustainability, covering the risk of greenwashing in the fast-growing area of sustainable investment products. ESMA also expects to be mandated to support the regulatory framework for sustainable finance, under the Corporate Sustainable Reporting Directive, the proposed regulation for EU Green Bonds and the SFDR.
• Markets and infrastructures. Developing technical standards on authorisation and registration of benchmark providers. Delivering the final technical standards and guidelines mandated under the CCP Recovery and Resolution Regulation.
• Risk assessment. Continuing to monitor market developments to assess risks, in particular the impact of commodity market developments, financial market impacts of inflation and rising interest rates.
• Supervision and convergence. Continuing risk-based supervision of all EU CRAs, TRs and SRs as well as certain DRSPs, benchmark administrators and third-country CCPs, and work with national authorities to promote supervisory convergence and a common understanding of where major risks lie. Preparing for the supervision of Consolidated Tape Providers (CTPs), subject to ongoing legislative proceedings on MiFIR review and for the oversight of critical ICT third-party providers (CTPPs) with the other ESAs.

^{1 Comprised of the European Commission, EU Council and European Parliament.
2 European Supervisory Authorities comprised of EBA, EIOPA, ESMA.}