Author: Selwyn Manning

Source: European Banking Authority

The three European Supervisory Authorities (EBA, EIOPA and ESMA – ESAs) today published a joint Opinion on the assessment of the Sustainable Finance Disclosure Regulation (SFDR). The ESAs call for a coherent sustainable finance framework that caters for both the green transition and enhanced consumer protection, taking into account the lessons learned from the functioning of the SFDR.

The ESAs focus on ways to introduce simple and clear categories for financial products. The simplifications consist of two voluntary product categories, “sustainable” and “transition”, that financial market participants should use to ensure consumers understand the purpose of the products. The rules for the categories should have a clear objective and criteria to reduce greenwashing risks.

The ESAs recommend that the European Commission consider the introduction of a sustainability indicator that would grade financial products such as investment funds, life insurance and pension products.

In addition, the Opinion also covers the following areas:

• appropriate disclosures for products outside the two categories to reduce greenwashing,
• improvements to the definition of sustainable investments,
• simplification to the way disclosures are presented to investors,
• other technical suggestions including on which products should fall under the scope of SFDR and on how to improve disclosures regarding the negative impact of investments on people and the environment, and
• conduct consumer testing before putting forward any policy proposals to review the SFDR, such as to introduce a categorisation system and/or an indicator.

Background

The ESAs deliver this Opinion on their own initiative. The Opinion is published in the context of a comprehensive review of the SFDR framework by the European Commission, which includes the SFDR regulation and Delegated Regulation. Going forward, the ESAs are ready to support the European Commission in future policy considerations on any review of the SFDR framework. 

Source: European Banking Authority

During the Board of Appeal Annual Meeting on 13 June 2024, the three European Supervisory Authorities (EBA, EIOPA and ESMA – ESAs) renewed the President and elected the Vice-President of the Board of Appeal, for a term of 2.5 years.

Michele Siri, Professor of Insurance and Financial Markets Law, University of Genoa, Italy, was renewed as Board of Appeal’s President and Margarida Lima Rego, Associate Professor and Vice-Dean at NOVA School of Law, NOVA University, Portugal, was appointed as Board of Appeal’s Vice-President.

The President and Vice-President are designated among the Board of Appeal’s members. The President’s role is to direct the business and the administration of the Board of Appeal, while the Vice-President will perform the functions of the President in the event of the incapacity of the President or other exceptional reasons.

The Board of Appeal is composed of six members and six alternates, appointed by the ESAs. The members are individuals with a proven track record of professional experience in the fields of banking, insurance, occupational pensions and securities markets or other financial services, and with the necessary legal expertise to provide expert legal advice in relation to the activities of the Authorities.

The Board of Appeal is a joint body of the ESAs, introduced to protect effectively the rights of parties affected by decisions adopted by the ESAs. It is an independent and impartial body, responsible for deciding on appeals against certain ESA decisions.

More information on the Board of Appeal is available here.

Source: Government of the Netherlands

News item | 14-06-2024 | 10:57

Building on a foundation of long-standing friendship and continued cooperation, this new MOU facilitates further collaboration between Canada and the Netherlands across a spectrum of STI initiatives in trade, investment and technology. Together, the 2 nations will reinforce existing partnerships and develop new ones to ensure better access to leading technologies and scientific advances.

Key areas outlined in the MOU include:

• collaborating across borders to address global challenges, such as climate change, food security and energy security
• promoting international collaboration in research projects, multilateral initiatives and joint scientific endeavours
• encouraging businesses to participate in STI initiatives, invest in research and contribute to addressing priority global challenges
• facilitating increased access to scientific research, technologies, markets and talents

This MOU promotes integrity and ethical research standards as well as diversity, inclusion and gender equality in research. It also supports efforts to integrate Canadian and Dutch stakeholders into global value-chain and research projects, strengthening broader European Union-Canada partnerships in STI.

Quotes

This MoU is another milestone in the excellent bilateral relationship between the Netherlands and Canada. We are both at the forefront of Science, Technology and Innovation developments. At this very moment, a Dutch semiconductor mission with 30 Dutch companies and R&D institutions is visiting Toronto to identify opportunities for collaboration with the Canadian ecosystem. This MoU will help to further deepen these types of cooperation for the benefit of both our nations and solving global challenges together. 

– Liesje Schreinemacher, Minister for Foreign Trade and Development Cooperation

This MOU marks an exciting milestone in our relationship with the Netherlands. By working together more closely, we can leverage our respective strengths and expertise to tackle today’s global challenges and drive competitiveness to the advantage of both our nations.

– Mary Ng, Minister of Export Promotion, International Trade and Economic Development

Quick facts

• In May 2018, the Netherlands and Canada signed the Memorandum of Understanding between the National Research Council of Canada and the Netherlands Organization for scientific research on research and innovation partnership. This MOU promoted bilateral and multilateral activities and established a framework for cooperation in research, development and innovation.
• In 2021, a strategic dialogue between the Netherlands and Canada solidified the partnership on STI with a focus on 3 priority areas: energy, food systems and agricultural technologies, including critical raw materials and key enabling technologies such as semiconductors, photonics and quantum. Talent and equity, diversity and inclusion were also crosscutting themes.
• Canada is one of the Netherlands’ most significant trade, investment and innovation partners. The Netherlands was Canada’s top merchandise export destination in the European Union in 2023.  

Associated links

Source: European Banking Authority

The European Banking Authority (EBA) publishes today the package of technical standards and guidelines under MiCAR on prudential matters, namely own funds, liquidity requirements, and recovery   plans. These products are part of the EBA’s ongoing efforts to foster a well-regulated market for asset-referenced and e-money tokens in the EU.

The package of EBA regulatory products comprises:

• Final draft regulatory technical standards specifying adjustment of own funds requirement and minimum features of stress testing programmes of issuers of asset-referenced tokens (ARTs) and of e-money tokens (EMTs) subject to such requirements. These standards specify: i) the criteria for the assessment of ‘higher degree of risk’, ii) the procedure for competent authorities to determine the period of time considered appropriate for issuers to increase the own funds amount to the higher own funds requirements and the measures to be taken to ensure the timely compliance thereof and iii) a minimum set of requirements to issuers for the design and implementation of their stress-testing programmes.
• Final draft regulatory technical standards specifying the procedure and timeframe for an issuer to adjust the amount of its own funds to 3% of the average amount of the reserve of assets when the relevant issuer is issuing an ART or EMT classified as ‘significant’. Considering the feedback received on both RTSs, following the consultation period, the timeframe for the issuer to provide an implementation plan to increase the own funds requirements has been changed to 25 working days. Additionally, the maximum amount of time that the competent authority may grant to the issuer to comply with the plan has been adjusted upwards to 6 months maximum.
• Final draft RTS further specifying the liquidity requirements of the reserve of assets. The draft RTS set specific minimum percentages of the reserve of assets according to daily and weekly maturities. They also establish the minimum amount of deposits in each official currency referenced. Furthermore, they envisage overall techniques of liquidity management to seek minimum creditworthiness, liquidity soundness and minimum diversification of bank deposits counterparties in the reserve of assets as well as to ensure minimum overcollateralisation to seek correlation between the reserve of assets and the assets referenced.
• Final draft RTS to specify the highly liquid financial instruments. These draft RTS set the highest quality liquid assets in the liquidity coverage ratio (LCR) as eligible highly liquid financial instruments. At the same time, and in order to seek for correlation between the highly liquid financial instruments and the assets referenced, in the case of ARTs referencing assets other than official currencies, financial instruments tracking the value of the assets referenced by the token or derivatives relating to them, are deemed eligible as highly liquid financial instruments. Furthermore, the draft RTS set concentration limits of highly liquid financial instruments by issuer.
• Final draft RTS to specify the minimum content of the liquidity management policy and procedures. These draft RTS envisage procedures for identifying, measuring and managing liquidity risk, a contingency policy and mitigation tools as well as minimum aspects of liquidity stress testing.
• Guidelines on recovery plans specifying the format and the content of the recovery plan that issuers need to develop and maintain. Considering the feedback received during the consultation period, the Guidelines further specify the content of the communication and disclosure plan. A number of targeted amendments were also made to streamline the wording and provide further clarity, inter alia by adding new definitions and by introducing a new paragraph to clarify that any provision regarding certain requirements applicable to the reserve of assets (e.g. certain recovery plan indicators and scenarios) does not apply to issuers of EMTs that are not subject to hold a reserve of assets in accordance with MiCAR.

Legal basis and next steps

The draft RTS relating to own funds have been developed in close cooperation with the European Securities and Markets Authority (ESMA) and the European Central Bank (ECB), in accordance with Article 35(6) and Article 45(7)(c) of Regulation (EU) 2023/1114 on Markets in Crypto-assets (MiCAR), and specify the procedure and timeframe for own funds adjustments.

The draft RTS on liquidity have been developed, in close cooperation with ESMA and the ECB, to further specify the liquidity requirements of the reserve of assets, to specify the highly liquid financial instruments in the reserve of assets and to specify the minimum content of the liquidity management policy and procedures, in accordance with Articles 36(4), 38(5) and 45(7)(b) of MiCAR respectively.

The Guidelines on recovery plans have been developed in accordance with  Article 46(6) of MiCAR after consultation with ESMA. The Guidelines specify the format of the recovery plan and the information to be provided therein.

Source: Government of the Netherlands

News item | 10-06-2024 | 09:30

At a later date, the ECtHR will give judgment on the responsibility the Russian Federation bears for the deaths of all persons on board flight MH17 and for the suffering that the next of kin have experienced and continue to experience as a result of the Russian Federation’s actions. It will likely be another year before a judgment is handed down.

On 25 January 2023, at the hearing on the admissibility of the inter-State application, the ECtHR ruled that the Russian Federation exercised jurisdiction in eastern Ukraine when flight MH17 was shot down. In doing so, the ECtHR became the first international court to confirm Russia’s involvement in the downing of the aircraft.

The European Court of Human Rights and flight MH17

The purpose of the European Court of Human Rights (ECtHR) is to hold states to account for human rights violations. Both states and individuals can lodge applications with the ECtHR. In 2020, the Netherlands lodged an application with the ECtHR against the Russian Federation regarding Russia’s role in the downing of flight MH17 over eastern Ukraine on 17 July 2014. All 298 people on board, including 196 Dutch nationals, lost their lives.

MH17: the Netherlands’ application against Russia

The Netherlands argues that the Russian Federation played an important role in the downing of flight MH17. It also believes that the Russian Federation did not investigate the matter sufficiently and did not cooperate sufficiently with Dutch authorities’ requests for information. According to the Netherlands, this, and the fact that the Russian Federation continues to deny any involvement in the downing of flight MH17, has caused the victims’ next of kin additional suffering. What’s more, there were no legal remedies available to the next of kin in Russia itself.

The Netherlands’ inter-State application is being heard jointly with a number of inter-State applications lodged by Ukraine against the Russian Federation. Those applications concern actions by the Russian Federation in eastern Ukraine since 2014. The last application to be added to this group of cases was Ukraine’s inter-State application against the Russian Federation regarding the war in Ukraine since February 2022.

Next step towards justice

The hearing of 12 June 2024 on the downing of flight MH17 is an important step towards establishing the truth, holding the perpetrators accountable and achieving justice for all the victims and their next of kin. The parties involved in the application and the intervening third parties – including the next of kin – will have the opportunity to present their views at the hearing. The court will not give judgment immediately after the hearing. The ECtHR has handled the case expeditiously, but it will likely be another year before a judgment is handed down.

The hearing will be held on Wednesday 12 June 2024 from 9.00 at the European Court of Human Rights in Strasbourg and is open to the public. A video recording will be made available after the hearing.

Source: European Banking Authority

The Joint Committee of the European Supervisory Authorities (EBA, EIOPA and ESMA – ESAs) today published its 2023 Annual Report, providing an account of the joint work completed over the past year.

In 2023, under the EBA’s chairmanship, the Joint Committee continued to play a coordinating role to facilitate discussions and the exchange of information across the three ESAs, the European Commission, and the European Systemic Risk Board (ESRB). Through the Joint Committee the ESAs explore and monitor potential emerging risks for financial markets participants and the financial system as a whole.

The main areas of cross-sectoral focus were joint risk assessment, sustainable finance, digitalisation, consumer protection, securitisation, financial conglomerates, and central clearing. Among the Joint Committee’s main deliverables were policy products for the implementation of the Digital Operational Resilience Act (DORA) as well as ongoing work related to the Sustainable Finance Disclosure Regulation (SFDR).

Background

The Joint Committee is a forum with the objective of strengthening cooperation between the European Banking Authority (EBA), the European Insurance and Occupational Pensions Authority (EIOPA) and the European Securities and Markets Authority (ESMA), collectively known as the three European Supervisory Authorities (ESAs).Through the Joint Committee, the three ESAs coordinate their supervisory activities in the scope of their respective responsibilities regularly and closely and ensure consistency in their practices. 

Source: European Banking Authority

The European Banking Authority (EBA) today published an Opinion following notification by the Norwegian Ministry of Finance of its intention to amend the risk weights for exposures secured by mortgages on commercial immovable property. The measure aims to limit risks associated with commercial immovable property. Based on the information provided, the EBA does not object to the risk weight adjustment.

With the application of this measure, the Norwegian Ministry of Finance sets a risk weight of 100% for exposures secured by commercial immovable property and 75% for exposures secured by commercial immovable property meeting the requirements for inclusion in the retail category. The default risk weight of 50% under the standardised method for exposures which are fully and completely secured by mortgages on commercial immovable property (article 126 CRR) does not reflect the actual risk of these exposures.

In its Opinion, the EBA acknowledges the concerns of the Ministry of Finance of Norway regarding the financial stability risks stemming from commercial immovable property and the uncertainty in the macroeconomic environment in general. In its Opinion, the EBA welcomes the steps taken by Norwegian authorities to collect additional data and provide a better understanding of the agricultural immovable properties and related collateralised loans. The EBA encourages further analysis of the sector to fill the missing gaps and assess other sectors to ensure that the applied risk weights adequately reflect the actual risks related to the targeted exposures.

The proposed measure includes a carve-out for exposures secured by agricultural immovable property, which are not considered residential immovable property, and are therefore subject to the risk weight set out in article 126(1) CRR. According to the notification, the sector “agriculture, forestries and fisheries (excl. fish farming)” is among the sectors with the lowest historical losses. Therefore, the higher risk weight of 100% set for exposures secured by commercial property would not be needed.

Legal basis

On 25 April 2024, the European Banking Authority (EBA) received a notification from the European Systemic Risk Board (ESRB) on the intention of the Ministry of Finance of Norway to apply a measure in accordance with Article 124(2) of Regulation (EU) No 575/2013 of the European Parliament and of the Council (Capital Requirements Regulation, CRR). In accordance with the third subparagraph of Article 124(2) of the CRR, as incorporated into the EEA Agreement and adapted by Joint Decision No 079/20193 within one month of receiving notification from the designated or competent authority entrusted with the national application of Article 124 CRR, the EBA is required to provide its Opinion to the EFTA State concerned.

Source: European Banking Authority

Consultation process

​Legal basis and background

Source: European Banking Authority

The European Banking Authority (EBA) has been actively working on shaping the regulatory landscape for crypto assets by publishing three regulatory products on governance, conflicts of interest and remuneration under MiCAR. These products are part of the EBA’s ongoing efforts to foster a transparent, secure, and well-regulated crypto-assets market.

The package of EBA regulatory products on governance and remuneration includes:

Guidelines on the minimum content of the governance arrangements for issuers of ARTs that specify further the various governance provisions in MiCAR, taking into account the principle of proportionality. In addition, these Guidelines clarify the tasks, responsibilities and organisation of the management body, and the organisational arrangements of issuers, including the sound management of risks across all the three lines of defence.

Final draft Regulatory Technical Standards (RTS) on the minimum content of the governance arrangements on the remuneration policy. The RTS are applicable to issuers of significant asset-referenced tokens (ARTs) and electronic money institutions issuing significant e-money tokens (EMTs), and, where Member States require to apply Article 45(1) MiCAR, to issuers of non-significant EMTs.

To ensure that remuneration policies promote the sound and effective risk management of issuers, do not create incentives to reduce risk standards and ensure the cross sectoral consistency, these final draft RTS set out a framework similar to the remuneration framework for investment firms that aims at achieving the same regulatory objectives.

Final draft RTS on conflicts of interest for issuers of ARTs that specify the requirements for policies and procedures on conflicts of interest (CoI). Issuers of ARTs shall implement and maintain effective policies and procedures to identify, prevent, manage and disclose conflicts of interest. For CoI to be effectively managed, the policies and procedures should ensure that there are sufficient resources available for their management.

The final draft RTS underline that Issuers of ARTs should pay particular attention to conflicts of interest that could arise in relation to the reserve of assets. Where the issuer of ARTs is a member of a group, the policies and procedures must also take into account any circumstances which may give rise to a CoI due to the structure and business activities of other entities within the group.

Legal basis and next steps

The EBA guidelines on the minimum content of the governance arrangements for issuers of ARTs have been developed in accordance with Article 34(13) of MiCAR which mandates the EBA in close cooperation with European Securities and Markets Authority (ESMA) and European Central Bank (ECB) to issue guidelines to specify the minimum content of the governance arrangements for issuers of ARTs in particular regarding the monitoring tools for the risks; the business continuity plans; the internal control mechanism; and the audits, including the minimum documentation to be used in the audits.

The RTS on the minimum content of the governance arrangements on the remuneration policy have been developed in accordance with Article 45(7) of MiCAR which mandates the EBA in close cooperation with ESMA to develop the RTS specifying the main governance processes regarding the adoption and maintenance of the remuneration policy and the main policy’s elements that should be adopted by the issuer as part of the remuneration policy.

The RTS on conflicts of interest for issuers of ARTs have been developed in accordance with Article 32(5) of MiCAR which mandates the EBA to specify the requirements for the conflicts of interest policies and procedures for issuers of asset-referenced tokens as well as the details and methodology for the content of the disclosure. It has been elaborated in close cooperation with the European Securities and Markets Authority (ESMA), who is mandated to develop a similar RTS for crypto-asset service providers (CASPs) under Article 72(5) of MiCAR.

Source: European Banking Authority

Detailed information on each phase of the DMP 2.0 implementation