Key Regulatory Topics: Weekly Update 14 – 20 May 2021
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Brexit
Please see the Other Developments section for the FCA May 2021 regulation round up where, among other things, it reminds consumer credit firms of the post-Brexit changes that will take effect from 1 June.
Conduct
Please see the Other Developments section for the FCA May 2021 regulation round up where, among other things, it reminds firms that the SM&CR regime is now fully effective for all firms authorised under FSMA.
Consumer/Retail
Please see the Payment Systems and Payment Services section for the FCA Dear CEO letter, sent to e-money firms with regards to FSCS protection and financial promotions.
Please see the Other Developments section for the FCA May 2021 regulation round up where, among other things, it reminds consumer credit firms of the post-Brexit changes that will take effect from 1 June.
FCA consults on new consumer duty
On 14 May, the FCA began consulting on a new consumer duty, which would set higher expectations for the standard of care that firms provide to consumers. The consumer duty will have three key elements: (i) the consumer principle, which will reflect the overall standards of behaviour the FCA expects from firms. The wording being consulted on is: 'a firm must act in the best interests of retail clients' or 'a firm must act to deliver good outcomes for retail clients’; (ii) cross-cutting rules which would require three key behaviours from firms, which include taking all reasonable steps to avoid foreseeable harm to customers, taking all reasonable steps to enable customers to pursue their financial objectives and to act in good faith; (iii) it will also be underpinned by a suite of rules and guidance that set more detailed expectations for firm conduct in relation to four specific outcomes – communications, products and services, customer service and price and value. The FCA is also consulting on the potential benefits of attaching a private right of action to the new consumer duty, and what any unintended consequences of this might be. While the FCA does not make any proposals on a private right of action, it sets out the arguments for and against. The deadline for comments is 31 July and the FCA is holding a webinar on the proposals on 10 June. After considering responses, the FCA expects to set out the proposed text for any new rules or guidance in a second consultation by 31 December and make any new rules by 31 July 2022.
Covid-19
Please see the other sections for product-specific updates relating to Covid-19.
Financial crime
EC speech broadly outlining reforms in AML and CTF action plan
On 18 May, the EC published a speech by Mairead McGuinness, European Commissioner for Financial Services, Financial Stability, and Capital Markets Union in which she outlines elements of the reforms the EC intends to present further to its May 2020 AML and CTF action plan. The EC plans: (i) to publish a package of legislative proposals in July; (ii) to create more harmonised rules and a new AML Authority at EU level. The idea is to have common standards, common application and common supervision of the rules. The AML Authority will: (a) be the direct supervisor of certain financial sector entities which operate cross-border and are in the highest risk category; (b) act as a coordinator and overseer of national supervisors for other entities, including entities outside the financial sector; (c) coordinate and provide support to Financial Intelligence Units; and (d) prepare technical standards and guidelines and advice the EC. The EC expect the Authority to start carrying out direct supervision in 2026; (iv) for rules for the private sector to be laid down in a directly-applicable EU regulation. The EC will also review the list of sectors covered by AML rules. The first step will be to align it with the latest FATF standards and cover all types of Virtual Asset Service Providers as obliged entities. This also means ensuring the traceability of transfers of virtual assets and so they will be added to the scope of the existing Transfer of Funds regulation; (v) to increase the detail in some areas already included in the AML Directive such as Customer Due Diligence and beneficial ownership; (vi) to set an EU-wide upper limit for cash purchases of €10,000. In terms of non-legislative action, the EC plans to: (1) launch a consultation on information exchange and public-private partnerships, in order to publish guidance by the end of the year; (2) deepen its involvement in FATF and step up EU coordination on global AML issues; and (3) carry out enforcement where the AML framework is not being implemented in Member States. A key priority is making sure that beneficial ownership registers are up and running and fully populated.
FCA speech on the rise in scams and the threat to a legitimate financial services industry
On 18 May, the FCA published a speech given by Mark Steward, FCA Executive Director of Enforcement and Market Oversight, on the rise in scams and their threat to a legitimate financial services industry. Highlights include: (i) the FCA has a substantial role to play in preventing harm to consumers from unauthorised activities and it has made improvements to address scams as they are happening. Last year the FCA issued 1,204 specific warnings, which was an increase of 100% on 2019. The volume continues to increase this year at the same rate; (ii) the FCA’s investigation powers can only be used to investigate regulated firms or those offences prescribed in s168 of FSMA which does not include fraud. The FCA has no statutory power in respect of fraud and, if fraud charges are brought, they are private prosecutions, outside the ambit of the statutory remit given to the FCA by FSMA. While the FCA does have statutory power over the use of false or misleading statements in relation to securities, those offences will not bite where the investment product is outside the financial promotions perimeter. The perimeter is an intricate boundary that can produce different results in terms of regulatory power, consumer protection and outcome, depending on some equally technical distinctions; (iii) the FCA has ratcheted up its proactive monitoring of the internet with a dragnet approach with the express aim to capture suspicious advertising on the same day or 24 hours after it first appears; (iv) firms should be doing more to prevent harm also and regulated firms who let down their guard, especially in assisting firms on the Warning List, may well face action for doing so. The Warning List is updated on a daily basis and it should be an essential component of firms' existing systems and controls inhibiting financial crime; (v) since the end of the Brexit transition period, social media firms have been required to comply with the financial promotion restriction in section 21 of FSMA when providing any value adding services. Initial engagement with the FCA has been encouraging; and (vi) Mr Steward welcomes the publication of the new Online Safety Bill, though questions whether the proposals go far enough to protect consumers.
FinTech
Please see the Other Developments section for the EC’s consultation on roadmap for its supervisory data strategy, contributing to both the European data strategy and digital finance strategy.
Markets and Markets infrastructure
Trade Associations information statement in accordance with Article 15 of the UK SFTR
On 20 May, the International Swaps and Derivatives Association, the Association for Financial Markets in Europe, the Futures Industry Association, Inc., the International Capital Market Association, the International Securities Lending Association and the Securities Industry and Financial Markets Association published an information statement to help market participants comply with requirements under Article 15 of the UK Securities Financing Transactions Regulation (SFTR). The information statement can be used by firms to inform counterparties of the general risks and consequences that may be involved in consenting to a right of use of collateral provided under a security collateral arrangement or of concluding a title transfer collateral arrangement.
BoE consults on derivatives clearing obligation modifications to reflect interest rate benchmark reform
On 20 May, the BoE began consulting on a proposal to modify the scope of contracts which are subject to the derivatives clearing obligation, to reflect the ongoing reforms to interest rate benchmarks. The proposals would result in changes to Commission Delegated Regulation (EU) 2015/2205 supplementing EMIR with regard to regulatory technical standards on the clearing obligation (onshored as Binding Technical Standards (BTS) 2015/2205). As a consequence of the anticipated changes in market activity resulting from interest rate benchmark reform, the BoE intends to remove contracts that reference benchmarks that are being discontinued and replace them with Overnight Index Swaps, with the same range of maturities, which reference the replacement near risk-free reference rate (RFR) benchmarks selected for each currency. The changes being proposed are limited to those relating to benchmarks currently within the scope of the clearing obligation that are being discontinued by January 2022, specifically to remove contracts referencing: (i) EONIA and replace them with contracts referencing €STR; (ii) GBP Libor and replace them with contracts referencing SONIA; and (iii) JPY Libor. As the publication of the most widely used USD settings will cease in June 2023, the BoE’s proposed changes do not relate to the transition from USD Libor at this time. The dates on which each of the modifications to the clearing obligation come into force will coincide with key dates associated with the broader RFR transition. The deadline for comments is 14 July. Following consideration of any responses, the BoE will submit the proposed technical standards to HMT for approval. Subject to approval by HMT, the BoE intends to make and publish the amendments to BTS 2015/2205 in the autumn.
Draft technical standards instrument
ESMA proposes lowering the reporting threshold for net short positions to 0.1% on a permanent basis
On 20 May, ESMA published an opinion recommending that the EC permanently lower the threshold to notify net short positions on shares to national competent authorities (NCAs) from 0.2% to 0.1%. ESMA has examined the evidence gathered after its successive emergency decisions, beginning in March 2020, which lowered, for the first time, the notification threshold to 0.1% on a temporary basis. The analysis showed that a substantial amount of additional and essential information became available to NCAs due to the reporting of net short positions at the level of 0.1%. This additional transparency to NCAs of the real level of net short positions established in the market translates into an improved ability by NCAs to conduct market oversight. ESMA therefore considers it essential to lower the reporting threshold to 0.1% on a permanent basis. Considering the continued uncertainty of the current financial market conditions – which do not justify the adoption of emergency measures by ESMA under Article 28 of SSR but require nevertheless the availability of relevant information to promptly identify and react quickly to any threats to orderly markets, markets integrity or financial stability – ESMA proposes to the EC to adopt the relevant delegated act pursuant to Article 5(4) of SSR as soon as possible.
FCA consults on use of new powers over use of critical benchmarks under UK BMR
On 20 May, the FCA began consulting on how it proposes to use two new powers that were introduced through amendments to the UK BMR under the Financial Services Act. Where a synthetic LIBOR rate is implemented, the FCA will need to determine who is permitted to use it. This is because use of a permanently non-representative benchmark would be prohibited under the BMR, but the FCA can permit some or all legacy use to continue. The consultation sets out which factors the FCA thinks are relevant in deciding what legacy use of a permanently non-representative benchmark, such as any synthetic LIBOR, it will permit to continue. The FCA reminds market participants that any permitted use of synthetic LIBOR would not be a permanent solution, so parties will need to continue their efforts to amend their contracts. The consultation also sets out the FCA’s proposed approach to using its power to prohibit new use of a critical benchmark which is ending. This power is separate to the legacy use power described above and will be particularly relevant to US dollar LIBOR, given most settings will continue in their current form until mid-2023. The FCA aims to consult again on finalised policies in Q3. The FCA intends to confirm its final decisions as soon as practicable in Q4. The deadline for comments is 17 June.
RFRWG recommend successor rate for fallbacks in bond documentation referencing GBP LIBOR
On 18 May, the Working Group on Sterling Risk-Free Reference Rates (RFRWG) published a statement recommending the use of overnight SONIA, compounded in arrears, as the successor rate to replace GBP LIBOR for the purposes of the operation of fallbacks in bond documentation that envisages the selection of a recommended successor rate. The statement recommends that it should be left to the issuer to decide on the conventions to be used to accompany the recommended successor rate. Where relevant, regard should also be had to the RFRWG’s recommendation in September 2020 of a credit adjustment spread methodology when calculating the credit adjustment spread which should then be applied to the recommended successor rate for contractual fallbacks in cash market products referencing GBP LIBOR.
IBA launches GBP SONIA spread-adjusted ICE swap rate ‘beta’ settings
On 17 May, the Intercontinental Exchange announced that ICE Benchmark Administration Limited (IBA) launched GBP SONIA spread-adjusted ICE swap rate ‘beta’ settings, which it will be publishing daily for an initial testing period. The settings are designed to support the market in transitioning non-linear derivatives, structured products and cash market instruments that currently reference GBP LIBOR ICE swap rate. They are for information and illustration purposes in order to enable stakeholders to evaluate the rates and provide feedback. The ‘beta’ settings are published for tenors ranging from one to 30 years and are determined in line with the methodology proposed by the Working Group on Sterling Risk-Free Reference Rates in its paper “Transition in Sterling Non-Linear Derivatives referencing GBP LIBOR ICE Swap Rate”. IBA will announce in due course when setting will be made available for use in financial instruments.
IOSCO speech on a global perspective on derivatives regulation
On 17 May, IOSCO published a speech by Ashley Alder, its CEO, on global issues relating to derivatives regulation: (i) IOSCO and the FSB will be consulting the market on questions relating to non-bank financial intermediation (NBFI) resilience over the next few months. An overriding consideration is how to ensure that these NBFI activities are sufficiently resilient, but to do so in a way which does not stifle investment flows and hence their contributions to the real economy, especially during times of stress; (ii) IOSCO, the CPMI and BCBS will more closely examine the dynamics of margin calls in derivatives markets during the market turmoil last March and April. One concern is whether sudden changes in margin rates can have strong procyclical effects, particularly if previous margin models did not sufficiently account for extreme scenarios. This also raises questions about whether efforts to access liquidity may have affected other parts of the financial system and how easily assets which are held for the purpose of meeting liquidity needs can be monetised in times of major stress; (iii) Mr Alder is working with the Chairs of the FSB, CPMI and the FSB Resolution Steering Group to tackle questions on CCP resolution including whose resources should be used to support CCP resolution, and in what proportion, and whether the CCP rule books provide sufficient incentives for all stakeholders to facilitate an orderly resolution; (iv) IOSCO is carrying out work on questions raised by the Archegos incident, including whether the full implementation of BCBS-IOSCO margin requirements would have reduced the losses; (v) the Archegos incident also provides a good opportunity for IOSCO to assess the degree to which trade repositories (TRs) are achieving their original objectives. Namely, the ability of regulators to use information in TRs to quickly detect an untoward build-up of risk before any blow-up; and (vi) IOSCO fully supports the transition away from LIBOR. In view of the risks associated with a failure to prepare adequately for the transition, the onus is on firms to take immediate action.
ECB Banking Supervision to supervise securitisation requirements for banks
On 14 May, the ECB announced its decision to start ensuring that the banks it directly supervises comply with the requirements for risk retention, transparency and resecuritisation, which are set out under Articles 6 to 8 of the EU Securitisation Regulation. The ECB explains that the decision follows recent clarifications in the amendments to the Regulation, which are part of the EU’s Capital Market Recovery Package. The amendments explicitly state that risk retention, transparency and the ban on resecuritisation requirements are of a prudential nature and, therefore, should be supervised by the competent prudential supervision authorities. Over the coming months, the ECB will define how exactly it intends to perform these supervisory tasks. It will then communicate further details on its supervisory approach and model, including obligations for banks to notify their supervisor of securitisation-related activities.
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Payment systems and payment services
FCA six month deadline extension for Strong Customer Authentication
On 20 May, the FCA announced that it was extending the deadline for implementing Strong Customer Authentication for e-commerce transactions by six months to 14 March 2022. The FCA still expects firms to continue to take robust action to reduce the risk of fraud.
FCA Dear CEO letter to e-money firms on FSCS protection
On 18 May, the FCA sent a letter to the CEOs of e-money firms asking them to contact their customers within the next six weeks to make it clear how their money is protected through safeguarding and that FSCS protection does not apply. The FCA is concerned that many e-money firms compare their services to traditional bank accounts or hold themselves out as an alternative in their financial promotions, but do not adequately disclose the differences in protections between e-money accounts and bank accounts. In particular, they do not make it clear that FSCS protection does not apply. The FCA reminds firms that they must consider the information needs of customers and communicate with them in a way which is clear, fair and not misleading. The FCA is also concerned that firms are giving a potentially misleading impression to customers about the extent to which products or services are regulated by the FCA. If a communication or a financial promotion or payment service or electronic money promotion names the FCA as the regulator of a firm or other provider, and refers to matters it does not regulate, the firm should ensure that the communication makes clear that those matters are not regulated by the FCA. The FCA asks that firms review their financial promotions in light of BCOBS 2.3.1AR and BCOBS 2.3.4G. Finally the FA asks that firms’ boards consider these issues and approve the action taken in response. The FCA will be following up, with a sample of firms, to assess the action taken.
Prudential regulation
PRA statement on supervisory benchmarking exercise relating to capital internal models
On 18 May, the PRA published a statement on the 2022 and 2023 supervisory benchmarking exercise for capital internal models. As set out in the PRA Rulebook, relevant firms are required to annually report information on their internal approaches to the PRA. The specifications to report this information were included in Commission Implementing Regulations. However, such technical standards are outdated and in relation to market risk are no longer applicable under UK law. Therefore, firms will not be required or expected to submit any data for the 2022 and 2023 benchmarking exercise. This includes credit risk, market risk and IFRS 9 data. For IFRS 9, it reflects the fact that no requirement to submit this information has been brought into UK law. Recognising the end of the UK’s participation in the EBA benchmarking exercise; the upcoming changes to credit and market risk models as a result of the EBA Internal Ratings Based roadmap; and the UK’s future implementation of the Fundamental Review of the Trading Book, the PRA intends to review the future direction of the exercise. The PRA will consult on any future proposals for a benchmarking exercise in due course. Firms should expect the market risk benchmarking exercise to resume in line with the UK implementation of FRTB and the credit risk benchmarking exercise to resume in 2024.
ECB adopts amendments on SSM reporting of supervisory financial information
On 18 May, the ECB published a Regulation amending Regulation (EU) 2015/534 on reporting of supervisory financial information (FINREP Regulation). The FINREP Regulation provides for the use, for its purposes, of templates developed by the EBA and enacted in Implementing Regulation (EU) No 680/2014, which was repealed and replaced by Implementing Regulation (EU) 2021/451. The references therefore need to be updated accordingly, as well as other updates to ensure alignment with the naming and structure of the templates in Implementing Regulation (EU) 2021/451. References also need to be updated with regards to CRR II. The FINREP Regulation should apply from 28 June 2021.
EBA report on Member States’ reliance on external credit ratings
On 17 May, the EBA publishes a report, which analyses the extent to which Member States' national law relies on external credit ratings. The report was based on a survey among EU banking supervisors and found: (i) no mechanistic reliance on external credit ratings was identified; and (ii) that the use of external credit ratings in the calculation of risk-weighted exposure amounts under the standardised approach, and under the external ratings based approach of the securitisation framework is limited. Based on these findings, together with developments in international regulation, namely the provisions to reduce mechanistic reliance on external credit ratings in the standardised approach of the credit risk framework in the final Basel III reforms, and in the new securitisation framework introduced in the CRR, the EBA recommends that this bi-annual report is no longer necessary. In addition, the report stresses that the “enhanced due diligence” introduced in the final Basel III framework should be implemented in the EU framework.
Recovery and resolution
SRB blueprint for CMDI framework review
On 18 May, the SRB published a blueprint (dated 18 March) setting out key considerations for the European Commission's review of its crisis management and deposit insurance (CMDI) framework, including: (i) the priority must be the completion of the banking union and establishment of the European Deposit Insurance Scheme (EDIS); (ii) the CMDI review should enshrine the hybrid model of EDIS into law, but with a time-bound transition period (e.g. 5 years) towards the steady state, i.e. full mutualisation, in order to avoid a never-ending transitional period; (iii) in the steady state, the SRB should act as the central authority with powers to manage all bank failures in the banking union, handling both EDIS and the Single Resolution Fund (SRF) (which could eventually be merged to exploit economies of scale); (iv) the SRB is enhancing its public interest assessment analysis and ensuring all relevant factors will be accounted for, in particular a system-wide stress scenario. This might expand the number of banks falling under resolution tools; (v) when it comes to the use of funds external to banks, there are two possible sources of additional funds in resolution: use of the SRF and using deposit guarantee scheme (DGS) funds. The use of DGS funds in resolution is severely restricted by the rigid conditions set out in the Single Resolution Mechanism Regulation (SRMR) and a review of these conditions seems warranted; (vi) there would be value in some harmonisation of administrative liquidation procedures, allowing for the transfer of covered deposits in the context of national insolvency proceedings for small entities; (vii) during the transitional period, clear governance arrangements within the SRM need to be implemented, to ensure that the SRB (plus national resolution authorities) and the DGS work jointly to use DGS funds in the most efficient way in resolution, or when supporting alternative measures. The latter would be harmonised in the transition period and then progressively centralised in parallel with the move to EDIS in the steady state; and (viii) updating the Banking Communication and aligning it with the BRRD/SRMR should be an urgent priority of the CMDI review. This is essential to ensure liquidation aid becomes a truly residual tool (e.g. for very small entities), and ultimately to minimise the use of public funds.
Sustainable finance
ICMA overview and recommendations for sustainable finance taxonomies
On 18 May, ICMA published a paper providing an international overview of official and market-based sustainable finance taxonomies. The paper summarises the various approaches and the different objectives that are being pursued. ICMA hopes it will help market participants and stakeholders to better understand existing taxonomies and their usage. It is also designed to inform policy makers and the regulatory community in their reflections on the pertinence of further taxonomy related initiatives and the goals that they may wish to pursue with these efforts. ICMA proposes key success factors for taxonomies with the objective of promoting international consistency and market usability; taxonomies should be: (i) targeted in their purpose and objectives; (ii) additional in relation to existing international frameworks; (iii) usable by the market for all intended purposes; (iv) open and compatible with complementary approaches and initiatives; and (v) transition-enabled incorporating trajectories and pathways.
BoE speech on plotting a course to net zero
On 18 May, the BoE published a speech by Sarah Breeden, Executive Director, UK Deposit Takers Supervision in which she considers steps UK financial services firms can do to help the UK move to a "net zero" economy. Highlights include: (i) the financial sector will need to steward firms through the transition to a net zero economy, as well as to help to build greater resilience to physical risks. This can be done through the provision of finance and risk management solutions and through support of investment in new green companies and technologies; (ii) the BoE expects firms to run climate scenarios as part of business as usual risk management and embed climate risk management within day-to-day decision-making; (iii) firms should consider the scenarios published by Network for Greening the Financial System (NGFS), of which the BoE is part. The NGFS will next month release an update to its June 2020 climate scenario, which will include bespoke scenarios, detailed macroeconomic modelling and a new online portal that can be used to explore physical risks; (iii) Ms Breeden shares some of the insights she has gleaned from the design of the NGFS climate scenarios including that: (a) if the transition is managed well, the cost to the economy in aggregate of getting to net zero need not be substantial; and (b) the impacts from physical risks will be significant; and (iv) Ms Breeden acknowledges that applying the scenarios in practice is not straightforward and offers advice to users: (1) don’t get weighed down in a spurious amount of precision. For the BoE’s own June 2021 Climate Biennial Exploratory Scenario exercise, it is putting emphasis on the qualitative questionnaire and an assessment of business model changes, rather than the traditional capital-adequacy metrics; (2) look at both physical and transition risks; (3) run credible, independent, standardised scenarios to aid comparability; and (4) share lessons learned by disclosing key assumptions and analysis limitations. She suggests firms use the guidance and tools produced by the Climate Financial Risk Forum in the UK.
Other developments
ESMA appoints Natasha Cazenave as Executive Director
On 20 May, ESMA appointed Natasha Cazenave as Executive Director from 1 June. Ms. Cazenave replaces Verena Ross, the outgoing Executive Director, and is appointed for a five-year term, renewable once. She is currently Deputy Secretary General and Head of the Policy and International Affairs Directorate at the Autorité des Marchés Financiers.
FCA to no longer accept change of legal status applications
On 20 May, the FCA updated its webpage on change of legal status applications to explain that from 1 June it will no longer be accepting these applications and firms will instead need to submit a new authorisation application (or a SUP 15 notification, depending on the legal structure of the previous entity and the new entity) and cancel the previous entity’s permissions. The FCA is making this change following a review, which found that new authorisation applications were actually more efficient and avoided delays. The FCA notes that if firms have any ongoing contractual agreements with their customers, firms must contact them and agree either to amend their existing contracts or to agree new contracts to take into account the change in the firm’s legal entity. Otherwise firms should let their customers know about the change in the legal entity as and when the firm next deals with them. Firms will also be required to sign a Deed Poll declaration which requires the firm to deal with any complaints from existing customers in the same way that it would customers of the new legal entity. This is intended to prevent firms leaving behind their obligations to their customers by changing their legal entity.
FCA regulation round-up May 2021
On 20 May, the FCA published its May 2021 regulation round up. Topics highlighted by the FCA include: (i) the SM&CR regime – the FCA notes that the regime is now fully effective for all firms authorised under FSMA. Solo regulated firms should have certified any staff that they are required to and trained all their financial services staff in the Conduct Rules. Larger firms are likely to need to ensure that they have effective systems and processes; (ii) the switch from analogue to digital phone lines – the current analogue phone network will be switched off across the UK at the end of 2025 to transfer to a digital phone network, delivered through Voice over IP. The FCA states that this is a major change to the UK’s telecoms networks and will affect anything that currently plugs into existing analogue telephone wall sockets. The FCA recommends that firms make plans to ensure there is no disruption to the services they provide; and (iii) post-Brexit changes for some consumer credit firms from 1 June – the FCA reminds firms subject to regulations 8, 10 and 11 of the Consumer Credit (Disclosure of Information) Regulations 2010 and CONC 2.7.2R (4)(a) of changes that take effect from 1 June 2021, which relate to the need to use the new (post-Brexit) pre-contract consumer credit information forms. The FCA notes that if the Disclosure Regulations are not complied with, the credit agreement is only enforceable against the debtor on an order of the court under the Consumer Credit Act 1974.
EC consultation on supervisory data strategy roadmap
On 18 May, the EC began consulting on a roadmap for its supervisory data strategy, contributing to both the European data strategy and digital finance strategy. The EC undertook a fitness check of supervisory reporting requirements, which concluded that while, overall, supervisory reporting in EU financial services is necessary and effective, there are some areas for improvement: (i) the current way of defining the reporting requirements and collecting data can be complex and lead to inefficiencies in the reporting process; (ii) there are some redundancies and inconsistencies in the requirements and cases where companies have to report very similar data to several authorities in parallel. Additional national reporting and ad hoc data requests by supervisors add to the complexities; and (iii) the requirements do not adequately reflect recent technological developments and are not well-suited to the use of modern IT tools. The supervisory data strategy will consider a number of co-ordinated sectoral and horizontal measures, which will likely be implemented over a number of years. The former may include: (a) the development of common data templates and provisions to facilitate data sharing; (b) rectifying inconsistent empowerments to the European Supervisory Authorities in defining reporting requirements at technical level; (c) mandating the reporting of common identifiers; (d) providing or clarifying specific definitions and scope of reporting; and (e) strengthening proportionality in sectoral reporting frameworks. Horizontal measures considered will focus on developing a common data dictionary (i.e. a repository of information about the data, including its meaning, relationships to other data, origin, usage, and format), enhancing data sharing and access, and improving the overall design of reporting requirements in EU legislation. The deadline for comments is 15 June. The EC intends to carry out further work in Q3 2021.