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21Nov2024

The new guidelines from the European Supervisory Authorities

Posted By: DEVLHON Consulting

DEVLHON Consulting decodes: The new guidelines from the European Supervisory Authorities

In a context where the governance of financial institutions is under heightened scrutiny, the European Union is strengthening its regulatory framework. The European Supervisory Authorities (ESAs), including the European Banking Authority (EBA), the European Insurance and Occupational Pensions Authority (EIOPA), and the European Securities and Markets Authority (ESMA), have recently published guidelines aimed at optimizing the fitness and propriety assessments of key leaders and stakeholders in the financial sector. These new measures, which introduce a centralized information exchange system, mark a crucial step toward more harmonized and effective supervision.

A Framework for Strengthened Governance

These guidelines are set within a clear legal framework, stemming from the EU’s founding regulations. Their objective is to ensure that individuals in strategic roles within financial institutions are assessed according to high standards, ensuring their integrity and competence. To achieve this, the ESAs have developed a specific information system, the ESAs Information System, which plays a key role in sharing the necessary data between the competent authorities of various Member States.

The ESAs Information System: A Tool for Authorities

This centralized system allows the essential information on individuals who have undergone an assessment to be cataloged and for the authorities who previously conducted these assessments to be quickly identified. However, to respect data confidentiality, only bilateral exchanges are permitted outside the platform, with information strictly limited to what is necessary. This system ensures a balance between efficiency and personal data protection, complying with the General Data Protection Regulation (GDPR).

Beneficial Harmonization for the Sector

By establishing a common approach across the European Union, these guidelines harmonize supervisory practices between countries and financial sectors. They speed up the assessment process by simplifying access to available information. Additionally, they strengthen the stability of the financial system by ensuring that key individuals in institutions meet the required standards of fitness and propriety, contributing to more robust governance.

Challenges to Overcome

Despite its many advantages, the implementation of this system presents some challenges. Competent authorities must integrate these new requirements without compromising legal evaluation deadlines. Additionally, particular attention must be paid to data security to avoid leaks or misuse. These issues require close coordination between the various sector stakeholders.

A Step Towards the Future

These new guidelines reflect the European Union’s commitment to modernizing financial governance and enhancing transparency in assessment processes. At DEVLHON Consulting, we support our clients in integrating these regulatory changes, helping them comply with the requirements while seizing the opportunities they present.

To learn more about the impact of these guidelines on your organization, contact our experts.

 

6Nov2024

DEVLHON Consulting Decodes: The Challenges and Best Practices of SFDR

Posted By: DEVLHON Consulting

DEVLHON Consulting Decodes: The Challenges and Best Practices of SFDR Disclosures According to the Latest ESA Report

In the context of sustainable finance, disclosures on Principal Adverse Impacts (PAI) of investment decisions play a crucial role in ensuring transparency and accountability among financial actors. Published by the European Supervisory Authorities (ESA), the 2024 annual report on PAIs, in line with Article 18 of the SFDR regulation, provides an overview of disclosure practices and offers recommendations for improving their clarity and accessibility.

Context and Scope of the Report

The ESA report assesses the status of PAI disclosures at both the entity and product levels, based on a survey conducted with National Competent Authorities (NCAs). PAI disclosures are mandatory for market participants with more than 500 employees, while smaller entities may opt for voluntary disclosure, provided they use the Level 2 regulatory template.

Current Status: Notable Improvement, but Gaps Remain

According to the report, disclosure practices have improved, especially in terms of accessibility and quality of information, although compliance with SFDR requirements remains uneven. Significant progress has been noted in making information more accessible to retail investors and improving the quality of product-level disclosures. However, certain entities continue to face challenges, particularly regarding the application of PAI indicators and explanations for disclosure choices.

Best Practices and Recommendations

The ESA highlighted several examples of best practices that could inspire the entire financial sector:

Increased Accessibility: Disclosures are easier to locate thanks to dedicated sections on websites, facilitating information access for investors.

Clarity of Information: Entities that provide contextual explanations and use clear language offer a better understanding of their sustainable impacts.

Details on PAI Indicators: Comprehensive disclosures include required environmental and social indicators, along with explanations of actions taken to reduce negative impacts.

Challenges and Areas for Improvement

The report also underscores key areas for improvement. Among the challenges encountered:

Insufficient Explanations: Some entities provide little to no explanation for their choice not to consider PAIs, often citing resource issues without offering a plan for compliance.

Inconsistencies in Methodologies: Divergent methodologies used for calculating certain indicators make comparisons between entities difficult.

Engagement Policies: ESA noted that many engagement statements remain generic and require more detail to ensure transparency regarding actions taken with investee companies.

Conclusion

With clear recommendations for NCAs and market participants, the ESA report aims to enhance the coherence and quality of sustainability information. By adopting these best practices, companies can not only comply with SFDR requirements but also strengthen their sustainable impact and investor confidence.

30Oct2024

DEVLHON Consulting Breaks Down New Technical Standards

Posted By: DEVLHON Consulting

DEVLHON Consulting Breaks Down New Technical Standards for the European Single Access Point (ESAP)

In response to the growing demand for transparency and harmonization of financial information across Europe, the European ESAP Regulation establishes a European Single Access Point—a central, standardized platform designed to facilitate access to financial and investment data. To ensure the efficiency and security of this platform, Implementing Technical Standards (ITS) have been defined. DEVLHON Consulting analyzes the final report from the Joint Committee (JC) of the European Supervisory Authorities (ESA), outlining the responsibilities of collection bodies (CB) and the technical specifications of the ESAP.

Collection Bodies: Roles and Responsibilities

Collection bodies, or “CBs,” are the guardians of the quality and integrity of financial data intended for the ESAP. Designated by national or European organizations, CBs play a crucial role in validating and transmitting information submitted by issuing entities.

Main Tasks of CBs:

– Automatic Validations: CBs are responsible for performing automatic validations for each type of data received. This step ensures data compliance with established standards and prevents duplication across Member States.

– Open Standard License: All data made available on the ESAP must adhere to a CC0 license or its equivalent. However, some protected data, notably credit ratings, may require more restrictive licenses to limit commercial use.

– Data Formats and Metadata: To ensure maximum interoperability, the ESAP mandates standardized data formats that allow for automated extraction and reading of information. The required metadata includes key elements such as the issuing entity, legal framework, and publication dates.

CBs are also required to transmit validated data to the ESAP within a maximum of 60 minutes, ensuring speed and fluidity in the process.

The ESAP: Technical Features and Accessibility

The ESAP is designed as a unified and open platform, meeting accessibility standards and offering advanced user features.

Publication API Features:

– Data Management: The API enables bulk access to information without manual intervention, facilitating efficient system interactions. The adoption of a widely supported RESTful architecture aligns with best practices for data flow.

– Download and Visualization: Users will be able to download large volumes of data, while an integrated viewer will make financial information accessible and easy to interpret.

The ESAP will also guarantee 97% availability each month, ensuring continuous access for users.

Unique Legal Identifier (LEI) and Metadata

The Legal Entity Identifier (LEI), compliant with ISO 17442, has been chosen as the unique identifier for entities listed on the ESAP. This identifier ensures high interoperability, facilitating links between various databases and allowing for enhanced data traceability.

The metadata accompanying each piece of information enables precise categorization and easy searchability. CBs are responsible for transmitting relevant metadata, including the legal framework of the publication, the originating Member State, and references from the Global LEI Foundation (GLEIF).

Market Feedback and Adjustments

As part of a public consultation, market participants suggested adjustments to harmonize validations across CBs to minimize differences between Member States. Other proposals included greater flexibility in formats, notably to allow the inclusion of non-extractable elements, such as graphs.

In response to this feedback, Level 3 (L3) documentation will be established to detail validation procedures and support CBs in their implementation.

Timeline and Implementation

Once adopted, the ITS will provide a clear and precise framework for CBs and the ESAP to manage the centralized collection, validation, and publication of financial information. The ESAP project will proceed in three progressive phases from 2026 to 2030, allowing CBs and companies to adapt gradually to these new requirements.

Conclusion

The establishment of the European Single Access Point (ESAP), supported by the ITS, marks a strategic advancement for European capital markets. By setting rigorous standards for the collection, validation, and accessibility of information, this project aims to provide investors with a reliable and centralized financial database. By optimizing access to information and ensuring its security, the ESAP will serve as a critical tool for transparency and the effectiveness of the European single market.

3Oct2024

EBA publishes its programme for 2025

Posted By: DEVLHON Consulting

DEVLHON Consulting deciphers: The priorities of the European Banking Authority’s (EBA) 2025 work program

The European Banking Authority (EBA) recently released its 2025 work program, part of a long-term strategy covering the period 2025-2027. This program reflects the EBA’s ambitions to adapt European Union (EU) banking regulations while ensuring financial stability in an evolving economic environment. Here are the key priorities of the EBA for the coming years, deciphered by DEVLHON Consulting.

 Strengthening the EU regulatory framework

One of the EBA’s main priorities for 2025 will be implementing the “EU banking package,” which includes Basel III reforms aimed at enhancing the resilience of banks in the face of crises. This framework introduces more risk-sensitive approaches to determining capital requirements, especially for credit, market, and operational risks. The EBA will develop regulatory standards to finalize this framework and ensure consistent application across the EU.

 Promoting sustainable financial stability

Sustainability is becoming a central issue for the banking sector. In a context of geopolitical risks and economic tensions, the EBA is focusing on forward-looking risk assessments, notably through stress tests. In 2025, the authority will launch a data portal to improve risk analysis infrastructure. This will also include initiatives to better monitor risks related to environmental, social, and governance (ESG) factors.

 Launching supervisory activities for DORA and MiCAR

The Digital Operational Resilience Act (DORA) and the Markets in Crypto-Assets Regulation (MiCAR) will come into effect in 2025. The EBA will begin overseeing critical IT service providers and supervising crypto-asset issuers, in collaboration with other European authorities. The introduction of these new responsibilities highlights the growing importance of digital technologies and decentralized finance in the European financial landscape.

 Transitioning to a new anti-money laundering framework

In 2025, the EBA will support the transition to the new EU Anti-Money Laundering Authority (AMLA). During this transition phase, the EBA will continue to carry out its mandate in this field while preparing to transfer its responsibilities to AMLA by the end of 2025. The focus will be on smooth regulation and integrating innovations in this domain.

 Conclusion

The EBA is pursuing an ambitious roadmap for 2025, marked by the rapid evolution of banking regulations and the increasing prominence of digital and ESG-related risks. At DEVLHON Consulting, we closely monitor these developments to provide you with insightful analyses and strategic support in your compliance and financial innovation initiatives.

The EBA’s 2025 program clearly demonstrates that resilience, sustainability, and innovation will be at the heart of European financial regulation in the coming years.

 

Source : https://www.eba.europa.eu/sites/default/files/2024-09/a5bce431-7793-4b75-bd07-d5741c961fbe/EBA%20Work%20programme%202025.pdf

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