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Key Regulatory Topics: Weekly Update 19 - 25 Nov 2021

In a bumper week for European legislation, we saw the Commission propose new measures to boost Europe’s capital markets, including legislative proposals flowing from the AIFMD Review and the MiFID/MiFIR Review. The Council of the EU adopted its position on MiCA and DORA and HM Treasury confirmed expected timing for the Wholesale Markets Review.

Capital markets

Please see the Other Developments section for the EC communication on progress on capital markets union action plan and package of measures.

EC proposal for a European single access point

On 25 November, the EC published a legislative proposal to establish a European Single Access Point (ESAP) to provide EU-wide access to information activities and products of the various categories of entities that are required to disclose such information, which is relevant to capital markets, financial services and sustainable finance. ESAP is part of the European financial data spaces presented in the Commission’s Digital Finance Strategy published in September 20202. The Digital Finance Strategy sets out the objective that, by 2024, information disclosed to the public pursuant to EU financial services legislation should be disclosed in standardised and machine-readable formats. The proposal comprises a Regulation to establish an ESAP, as well as a Directive and Regulation to amend various EU legislation to enable the functioning of the ESAP. The proposed ESAP Regulation includes: (i) scope, definitions and establishment of ESAP; (ii) conditions for voluntary submission of information; (iii) list and tasks of collection bodies; (iv) cybersecurity; (v) functionalities of ESAP; (vi) access to information; (vii) tasks of ESMA; (viii) monitoring of ESAP by ESMA; and (ix) ESAP review.

Legislative proposal to establish an ESAP

Directive to amend EU legislation

Regulation to amend EU legislation


EC consults on review of Mortgage Credit Directive

On 22 November, the EC began consulting on its review of the Mortgage Credit Directive (MCD). The EC’s previous work on the review highlighted that the MCD has been effective in raising the standard of consumer protection and has helped harmonise mortgage-lending practices across the Member States. Nevertheless, the level of protection still differs across Member States and some limitations, in particular in terms of scope and information disclosure requirements for digital delivery, seem to hinder the full effectiveness of the rules. The MCD was found to have had a limited impact on the creation of a single market for mortgages and the EC considered that there is a need to ensure that the MCD remains fit for purpose as the market develops and new challenges arise. Those identified in the consultation include: (i) the effect of digitalisation on new market players, automated decision-making systems, non-traditional data, consumer habits and consumer protection; (ii) the need to improve energy efficiency and ensure the use of sustainable materials in buildings in order to achieve the EU’s goal of carbon-neutrality in 2050; (iii) assess what lessons can be learnt from the handling of the Covid-19 crisis and the adoption of relief measures such as loan repayment moratoria; and (iv) to take into account the amendments suggested in the Consumer Credit Directive proposal. The deadline for comments is 28 February 2022.

Consultation webpage

Financial crime

ESMA 2020 annual report on EU market abuse sanctions

On 23 November, ESMA published its annual report on administrative and criminal sanctions, as well as other administrative measures, issued across the EU under MAR in 2020. The report found that National Competent Authorities and other authorities imposed a total of €17.5 million in fines related to 541 administrative and criminal actions under MAR. There has been an increase in the number of administrative sanctions and measures, however their financial penalties and the number and aggregated value of criminal sanctions have decreased.

Press release


HMT AML and CTF supervision report 2019/20

On 19 November, HMT published the AML and CTF supervision report 2019/20, the ninth annual report on money laundering supervision covering the period 6 April 2019 to 5 April 2020. Although the report concludes that actions taken by supervisors have remained broadly consistent with the previous reporting period, it also notes that there is still more work to do to achieve a greater consistency in approach to supervision and enforcement. HMT states that it will continue to work with supervisors to build on the progress made so far. HMT confirms that the Statutory Instrument, which makes a number of small time-sensitive updates to the MLRs and on which HMT consulted on in July is due to be laid in Spring 2022. The report also confirms that a review of the MLRs and Office of Professional Body Anti-Money Laundering Supervision Regulations due by 26 June 2022, as set out in action 33 of the Economic Crime Plan, is in motion. The final report on the review is expected in June 2022.



EP and Council reach political agreement on MiDLT legislative proposal

On 24 November, the EP announced that it has reached political agreement with the Council of the EU on the proposed Regulation on a pilot regime for market infrastructures based on distributed ledger technology (MiDLT). The EP states that negotiators decided that financial instruments services provided using the DLT market should be limited and subject to the following value thresholds: (i) shares (500 million euro); (ii) bonds (1 billion euro); (iii) corporate bonds (200 million euro); and (iv) UCITS (500 million euro). Additionally, operators of DLT can admit new financial instruments only until their total market value reaches 6 billion euro. Negotiators introduced the DLT settlement system and the DLT trading and settlement system, which should be able to cooperate with other market participants in order to test innovative solutions based on DLT. The DLT market infrastructures and their operators will be exempt from certain rules that fall under financial services legislation, but should have in place adequate safeguards to ensure investors are effectively protected when using DLT. These safeguards will include clearly defined liability to clients for any losses due to operational failures. The EP explained that to allow for competition, while preserving a level playing field and high standards of investor protection, as well as financial stability, new entrants should be able to access the pilot regime provided that they comply with the same requirements as authorised investment firms or market operators. Such requirements should be based on the service provided and on risks. Rules will be technologically neutral; operators of DLT market infrastructure will be required to comply with them irrespective of the technology used. Negotiators agreed that the operation of a DLT market infrastructure cannot undermine the EU’s climate policies. Development and investments in low- or zero-emission DLTs are therefore strongly encouraged.

Press release

Council of the EU reaches agreement on MiCA and DORA

On 24 November, the Council of the EU announced that it had adopted its position on the Regulation on Markets in Crypto Assets (MiCA), Digital Operational Resilience Act (DORA) and the Amending Directive accompanying the Digital Finance package proposals. The Council and the EP will now enter trilogue negotiations on the proposals. Once a provisional political agreement is found between their negotiators, both institutions will formally adopt the regulations.

Press release

Adoption document

Proposed MiCA

MiCA Annexes

Proposed DORA

Proposed Amending Directive

Fund regulation

EC legislative proposal for amendments to AIFMD and UCITS directive

On 25 November, the EC adopted a legislative proposal for a Directive amending the Alternative Investment Fund Managers Directive (AIFMD) and the UCITS Directive regarding delegation arrangements, liquidity risk management, supervisory reporting, provision of depositary and custody services and loan origination by alternative investment funds. The EC and EP will now consider the legislative proposal. The EC proposal contemplates that member states would have 24 months after the entry into force of the amending Directive to adopt and publish the laws, regulations and administrative provisions necessary to comply.

Legislative proposal

EC legislative proposal for amendments to ELTIF Regulation – CMU package

On 25 November, the EC adopted a legislative proposal for a Regulation containing amendments to the Regulation on European long-term investment funds (ELTIFs). The proposal aims to increase the uptake of ELTIFs across the EU, accelerating the acceptance and improving the attractiveness of ELTIFs as a ‘go to’ fund structure for long-term investments. The targeted changes to the fund rules include: (a) broadening the scope of eligible assets and investments; (b) allowing more flexible fund rules that include the facilitation of fund of-fund strategies; (c) reducing the barriers preventing retail investors from accessing ELTIFs, in particular the 10 000 euro initial investment requirement and the maximum 10% aggregate threshold requirement for those retail investors whose financial portfolios are below 500,000 euro; (d) to ease selected fund rules for ELTIFs distributed solely to professional investors; and (e) to introduce an optional liquidity window mechanism to provide extra liquidity to ELTIF investors and newly subscribing investors without requiring a drawdown from the capital of ELTIFs. The Council of the EU and the EP will now consider the legislative proposal.


Impact Assessment

Impact Assessment summary

Report on ELTIF framework


EP adopts position on legislation extending deadline to provide a KID under PRIIPs and UCITS

On 23 November, the EP announced that it had voted to adopt at first reading positions on the proposed legislation amending the PRIIPs Regulation and UCITS Directive to extend the transitional arrangement exempting companies from the requirement to provide retail investors with a key information document (KID) until 31 December 2022. The proposed amendment to the UCITS Directive also specifies that a KID should be considered as satisfying the requirements applicable to key investor information. The text also specifies that the EC should produce a report as a matter of urgency addressing problems in the PRIIPs Regulation including the need for a clearer definition of retail investors. The next step is for the Council of the EU to adopt the legislative proposals.

Press release

Markets and markets infrastructure

Please see the FinTech section for the summary on the Council of the EU’s position on MiCA and DORA.

EC proposal to amend MiFIR and MiFID II

On 25 November, the EC published legislative proposals for amendments to MiFIR and MiFID II. The proposed Regulation amending MiFIR seeks to enhance market data transparency, remove obstacles to the emergence of a consolidated tape, optimise the trading obligations and prohibit payments for forwarding client orders. Most of the amendments contained in the MiFID II proposal relate to the proposed changes to MiFIR.

Legislative proposal to amend MiFIR

Legislative proposal to amend the MiFID II Directive

PRA consults on operational resilience and operational continuity in resolution

On 25 November, the PRA began consulting on proposals to apply the group provisions in the Operational Resilience Part of the PRA Rulebook relevant to CRR firms to holding companies, and to make other minor formatting and clarification amendments to the Operational Resilience and Operational Continuity Parts of the PRA Rulebook. The PRA also proposes consequential amendments to Supervisory Statement (SS) 1/21 ‘Operational resilience: Impact tolerances for important business services’. The PRA proposes that the implementation date for the changes are: (i) 31 March 2022 for the Operational Resilience Part; and (ii) 1 January 2023 for the Operational Continuity Part. The deadline for comments is 14 January 2022.

Consultation paper

Consultation webpage

FCA and BoE consult on framework for derivatives reporting under UK EMIR

On 25 November, the FCA and BoE launched a joint consultation on proposals to amend the framework for derivatives reporting under UK EMIR. These are in relation to mandatory delegated reporting requirements, counterparty notifications and reconciliations processes and the use of XML schemas and global identifiers. The proposals aim to provide clarity to counterparties and Trade Repositories (TRs), including on areas where there are discrepancies on how certain data fields are reported. The proposal would result in the revocation of the UK versions of Commission Delegated Regulation (EU) No 148/2013 and Commission Implementing Regulation (EU) No 1247/2012 and their replacement by two sets of technical standards. The FCA is also proposing new targeted requirements for TRs in relation to the registration and reconciliation processes, to streamline the process for registration, ensure consistency of reporting and improve overall data quality. These proposals would result in rules for TRs in a new specialist sourcebook, the UK EMIR Rules (EMIRR). The deadline for comments is 17 February 2022.


FCA webpage

BoE webpage

EP and Council agree to CSDR changes to delay MBIs

On 24 November, a tweet by Commissioner McGuinness announced that the EP and Council had agreed to change the Central Securities Depositories Regulation (CSDR) to allow for the postponement of mandatory buy-ins (MBIs). This will delay MBIs beyond 1 February 2022.


HMT speech provides update on Wholesale Markets Review

On 24 November, HMT published a speech by John Glen MP, Economic Secretary to the Treasury where amongst other items, he provided an update on the government’s plans for the wholesale markets review. Mr Glen states that he is pleased to see the broad consensus on the vast majority of the issues identified in the consultation on the review. HMT will be publishing a full summary of the responses to the consultation early in 2022 and will set out the Government’s plans to take this work forward. The Government intends to legislate as early as parliamentary time allows to implement many of the changes identified in that consultation document. Mr Glen confirms that the Government will: (i) revoke the share trading obligation and the double volume cap; (ii) recalibrate the transparency regime for fixed income and derivatives market; (iii) and reduce the scope of the position limits regime for commodity derivatives and transferring the setting of position limit controls from the FCA to trading venues. Mr Glen adds that the government is working closely with the FCA on this agenda since some reforms will require changes to regulatory rules or guidance, and that the FCA has committed to starting that process in 2022.


FSB statement urges swift action to ensure preparedness for LIBOR cessation

On 22 November, the FSB issued a statement to support preparations for LIBOR cessation. Most LIBOR panels will cease at the end of this year, with certain key USD settings continuing until end-June 2023 to support the rundown of legacy contracts executed before January 1 2022, only. With only a few weeks remaining to the end of 2021, the FSB: (i) urges that market participants act urgently to complete any remaining steps set out in the FSB’s Global Transition Roadmap. Global and national financial regulators will be closely monitoring progress; (ii) recognises the widespread use of USD and other LIBORs in emerging markets and developing economies and therefore considers engagement with these economies to be a key part of LIBOR transition globally; (iii) considers that transition should be primarily to overnight risk-free-rates (RFRs), the most robust benchmarks available, to avoid reintroducing the weaknesses of LIBOR. It recognises that in some cases there may be a role for RFR-derived term rates and has set out the circumstances where the limited use of RFR-based term rates would be compatible with financial stability. It is crucial that potential alternative rates to LIBOR are especially robust and reflect credible underlying markets underpinned by a sufficient volume of transactions; and (iv) emphasises that active transition of legacy contracts remains the best way for market participants to have control and certainty over their contract terms, and provides a permanent solution and the ability to move to overnight RFRs, compounded in arrears. The FSB emphasises that synthetic LIBOR is being made available as a temporary bridging solution for legacy contracts only. It should not be directly or indirectly referenced in any new contracts. The FSB will continue to monitor the final steps in completing LIBOR transition over the coming months. Post end-2021, the FSB will monitor the effort to continue reducing the stock of legacy contracts which are using synthetic LIBOR rates, any continuing new issuance of USD LIBOR contracts post end-2021, and the size and resolution of legacy contracts referencing USD LIBOR that are due to mature after end-June 2023. The FSB will review these issues in mid-2022 and assess the implications for any further supervisory and regulatory cooperation that may be required.

Press release


ESMA final draft RTS for commodity derivatives under MiFID II recovery package

On 22 November, ESMA published its final draft technical standards for commodity derivatives under the MiFID II Recovery Package. The draft technical standards include proposals on the application procedure for position limit exemptions, a methodology to determine position limits and position management tools for trading venues, which will contribute to stable and orderly commodity derivative markets at a time of heightened scrutiny. Under the MiFID II Recovery Package, position limits will only continue to apply to agricultural commodity derivatives and to critical or significant commodity derivatives defined in Level 1 as commodity derivatives with a net open interest above 300,000 lots over a one-year period. As part of the implementation measures of the new framework, ESMA and the national competent authorities have also separately agreed on a procedure to ensure convergence in the calculation of the open interest and the determination of whether a commodity derivative qualifies as critical or significant. The draft regulatory technical standards (RTS) on the application procedure for the new position limit exemptions and the methodology for position limits have been incorporated into a broad new draft RTS. The new draft RTS 21a, which will be repealing RTS 21, also retains the provisions of RTS 21 that are not impacted by the changes made to the position limit regime and contains additional proposals by ESMA to improve the functioning of the position limits regime based on experiences following the application of MiFID II. In the report ESMA also: (i) explains the amendments it considers necessary to ITS 4 as a consequence of the exclusion of securitised derivatives from the scope of position limits; and (iii) sets out the draft RTS on position management controls, which provide additional tools for market monitoring by trading venues trading commodity derivatives. The EC has three months to decide whether to endorse the proposals. The revised MiFID II regime for commodity derivatives will apply at the end of February 2022.

Press release

Final report

ESRB summary compliance report on recommendation on liquidity risks arising from margin calls

On 22 November, the ESRB published a summary compliance report on its July 2020 recommendations aimed at addressing the liquidity risks potentially arising from margin calls. The addressees of the recommendations were a number of authorities that had been granted supervisory responsibilities over CCPs, clearing members and financial and nonfinancial counterparties. Key findings include: (i) the degree of compliance at this stage is significant and no major systemic concerns have been highlighted by the addressees’ responses. In general, the initial responses and the subsequent clarifications collected by the Assessment Team (AT) show that the recommendations have been widely accepted by the addressees; (ii) the clearing industry is highly concentrated both at bilateral and multilateral level; and (iii) despite the relatively high degree of compliance, in the AT’s opinion, several issues should be highlighted and further analytical and policy work may be warranted in some cases. In the area of central clearing, these issues relate to: (a) the evaluation of the performance of anti-procyclical (APC) tools used by CCPs to determine their initial margins – while generally positive, in a number of cases this assessment appears to be influenced by subjective factors and therefore the usefulness and viability of a benchmark to assess the “acceptability” of procyclicality could be considered; (b) despite the overall cautious approach that appears to have been adopted by large clearing members, the use of specific APC tools in client clearing seems to be lacking; (c) the responses indicate that the inclusion in the liquidity risk stress test scenarios of any two entities (not only clearing members, as strictly prescribed by the current regulatory framework) to which a CCP has liquidity exposure is already widely implemented; and (d) CCPs and their relevant national competent authorities seem reluctant to implement the pass-through of intraday variation margins, for both operational and risk-related reasons.


ESMA discussion paper on EMIR clearing threshold framework

On 22 November, ESMA published a discussion paper on the EMIR clearing threshold framework, as required by EMIR Refit. The paper aims to: (i) collect stakeholder views on the effectiveness and proportionality of the EMIR clearing thresholds and, more broadly, on the EMIR regime as a whole. It also looks at the effectiveness of the EU regime by comparing it to similar third-country regimes; (ii) to map the population that is currently subject to mandatory clearing to ultimately assess if the clearing thresholds are fit for purpose after the changes introduced in EMIR; and (iii) to assess if the thresholds should be revised to better tackle the systemic risk linked to OTC derivative trading activity, while preserving the clearing obligation as one of the pillars for financial stability in OTC derivative markets. The deadline for comments is 19 January 2022. ESMA will consider the feedback it receives and will continue its review with more recent data.

Press release

Discussion paper

FCA enters examination stage in the registration of first UK securitisation repositories

On 19 November, the FCA announced that it has assessed completeness and now reached the examination stage in the assessment process of applications received from Securitisation Repositories (SR) under the UK Securitisation Regulation. The FCA notes that the obligation to report public securitisations within the scope of the UK Securitisation Regulation to a SR will apply as soon as one SR is registered. The FCA will inform market participants when the registration of the first SR(s) is completed. The FCA has 40 working days in which to examine the application for registration and, if favourable, the entity will be registered as a SR. The FCA encourages reporting entities to take all necessary preparatory measures to comply with their reporting obligations to a SR.


FCA confirms recognition of the revised FX Global Code and the Global Precious Metals Code

On 19 November, the FCA confirmed that it is recognising: (i) the updated Global Foreign Exchange Committee (GFXC) FX Global Code, which sets principles of good practice standards for the global FX market; and (ii) the Global Precious Metals Code - maintained and updated by the London Bullion Market Association (LBMA), setting out principles to promote the integrity and effective functioning of the global precious metals market. The FCA notes that behaviour that is in line with an FCA recognised code will tend to indicate a person subject to the SM&CR is meeting their obligation to observe ‘proper standards of market conduct’ in relation to unregulated markets and that it expects firms and individuals to consider both the spirit and letter of code provisions. The FCA highlights practices that are not consistent with the Codes, after confirming with the GFXC and LBMA: (a) regardless of the terminology used, last look practices that incorporate a delay that is additional to what is required to complete price and validity checks (some market participants refer to such deliberate delays as ‘additional hold time’). For example, market participants should not prolong the duration of the last look window for the purpose of seeing if future prices move in their favour in relation to the client’s trade request; and (b) pre-hedging practices where market participants do not communicate their practices to clients in a manner that allows the client to understand the potential impact on the execution of their order. This includes practices where market participants do not have appropriate controls to monitor potential conflicts of interest, and do not have controls in place to limit access to confidential information relating to anticipated orders. More broadly, those who are signatories to the Codes, will need to make clear and transparent disclosures to market users to explain how their orders will be handled.


ESMA updates Q&As on BMR, CSDR, EMIR implementation, ECSPR, MiFID II/MiFIR investor protection, and Securitisation Regulation

On 19 November, ESMA updated its Q&As on: (ii) the BMR – two new Q&As on benchmark statements under Article 27(2a) of the BMR; (ii) the CSDR – two new Q&As with regards to partial settlement functionality; (iii) EMIR implementation – two new sub-questions with regards to the calculation of positions for the clearing thresholds under Articles 4a and 10, and the Article 10(3) hedging definition; (iv) the European crowdfunding service providers for business Regulation (ECSPR) – clarity with regards to: (a) the transitional period; (b) the meaning of "business activity or activities"; (c) the legal nature of the activity of individual portfolio management of loans; (d) the perimeter of the Article 21(6) prohibition; and (e) the key investment information sheet; (v) MiFID II and MiFIR investor protection topics – a new Q&A setting out the considerations manufacturers and distributors should take into account when specifying the target market category for CoCo-Bond Funds; and (vi) the Securitisation Regulation – updates and new questions on topics including: (1) individual fields in disclosure templates; (2) trigger measurements in investor reports; and (3) completing synthetic coverage information.





MiFID II and MiFIR investor protection and intermediaries Q&A

Securitisation Regulation Q&A  

ESMA consults on CCP investment practices for highly liquid financial instruments

On 19 November, ESMA began consulting on the potential extension of the list of financial instruments that are considered highly liquid with minimal market and credit risk, which are eligible for investments by CCPs under EMIR, and whether that list could include one or more money market funds (MMFs) authorised under the MMF Regulation. ESMA proposes to frame the discussion on financial instruments for CCP investments in line with the principles for financial market infrastructures to ensure consistency with international standards. Under current circumstances and given expected future MMF regulatory reforms, ESMA does not consider that there is sufficient ground to recommend an extension of the list of financial instruments for CCP investments to MMFs at this stage, but is consulting regardless. The deadline for comments is 24 January 2022. ESMA expects to submit a final report to the EC in Spring 2022.


Payment services and payment systems

EPC updates SEPA guidelines

On 22 November, the European Payments Council (EPC) published updated versions of its guidance: (i) on reason codes for SDD R-transactions. The guidance applies to the SEPA Direct Debit (SDD) Core rulebook and to the SDD Business-to-Business (B2B) rulebook; (ii) on reason codes for SEPA Credit Transfer (SCT) R-transactions. The guidance applies to the SEPA Credit Transfer (SCT) rulebook; and (iii) on reason codes for SEPA Instant Credit Transfer (SCT Inst) R-transactions. The guidance applies to the SEPA Instant Credit Transfer (SCT Inst) rulebook. These versions are effective 21 November. The EPC also published: (a) updated guidelines for the appearance of mandates for the SDD Core and SDD B2B schemes. This document contains guidance on the visual presentation of mandates issued by creditors under the SDD Core and the SDD B2B schemes as part of their offer to debtors to use the schemes as a way for making payments. It illustrates several ways to reduce the mandate size without losing any essential content whilst still remaining rulebook compliant; (b) an updated credit identifier overview, which provide basic information on Creditor Identifier (CI) characteristics per SEPA country to allow creditor payment service providers to check the validity of the CIs; and (iii) a clarification paper on SDD Core and SDD B2B rulebooks. The paper addresses operational aspects related to the rulebooks and seeks to ensure consistent implementation of the rulebooks by payment service providers participating in the schemes.

SDD R-transactions

SCT R-transactions

SCT Inst R-transactions

SDD Core/SDD BRB mandates

Credit identifier overview

Clarification paper

UK Finance strategy for open banking payments

On 22 November, UK Finance set out recommendations for the future strategy of open banking payments. The report provides case studies showing the enhancements that could be made to the open banking standards. These include: (a) introducing more payment execution certainty and visibility of payment status; and (b) improving information flow to banks on the type of payment being initiated. The key recommendations are: (i) increased industry governance and an associated technical group. UK Finance states that this should be considered once the CMA has made its decision on open banking governance and a successor body to the Open Banking Implementation Entity. It would also need to take account of the recent PSR announcement that it intends to regulate open banking payments; and (ii) further work is required to explore the development of a voluntary multi-lateral industry framework to introduce commercial application programme interfaces (APIs) and functionality/performance that sits outside the CMA Open Banking Order and PSD2. Roles, responsibilities and liabilities of different market participants could be described in such a framework. UK Finance consider the logical starting point for this exploration as a voluntary multi-lateral framework for Variable Recurring Payments (VRPs) to avoid fragmentation in the market resulting from bilateral arrangements as this area develops (VRP offers the potential to extend open banking to subscription payments). UK Finance will discuss the report with regulators and other industry bodies, and will take forward the recommendations during the final quarter of 2021 and the first quarter of 2022.


ECB Eurosystem oversight framework for electronic payment instruments, schemes and arrangements

On 22 November, the ECB published the Eurosystem oversight framework for electronic payment instruments, schemes and arrangements (PISA framework), together with an assessment methodology and an exemption policy. It replaces the “harmonised oversight approach and oversight standards for payment instruments” and all related oversight frameworks for cards, direct debits, credit transfers and the security objectives for e-money. The framework is aligned, where appropriate and possible, with the relevant principles of the CPMI-IOSCO “Principles for financial market infrastructures” and the Eurosystem’s “Revised oversight framework for retail payment systems”. It thus complements the Eurosystem’s oversight of payment systems and critical service providers and acknowledges relevant requirements set out for the prudential supervision of payment service providers. The Eurosystem will use the PISA framework to oversee companies enabling or supporting the use of payment cards, credit transfers, direct debits, e-money transfers and digital payment tokens, including electronic wallets. The PISA framework will also cover crypto-asset-related services, such as the acceptance of crypto-assets by merchants within a card payment scheme and the option to send, receive or pay with crypto-assets via an electronic wallet. Companies that are already subject to Eurosystem oversight are expected to adhere to the principles of the new framework by 15 November 2022. Other companies will have a grace period of one year from the moment they are notified that they will be subject to oversight under the new framework.

Press release

Framework document

Assessment methodology

Exemption policy

BoE speech on enhancing cross-border payments and RTGS

On 22 November, the BoE published a speech given by Victoria Cleland, Executive Director for Banking, Payments and Innovation, on work needed to improve cost, speed, transparency and access to cross-border payments. She also discusses the BoE's work to upgrade to its real time gross settlement (RTGS) payments system. Ms Cleland outlines the G20’s roadmap to enhance cross-border payments and celebrates the progress that has been made by FSB and CPMI in the year since its publication. However, Ms Cleland considers that there is an important role for the private sector too and encourages the private sector: (i) to respond to consultations and work closely with organisations leading work on the roadmap to help to shape policy and guidelines; and (ii) to consider what these enhancements to cross-border payments might mean for their own processes, systems and investments. It is incredibly important that the public and private sector work together to start preparing for these crucial, and transformative, changes. Ms Cleland outlines how the BoE’s multi-year programme to renew its RTGS service will help to enhance cross-border payments. The first major milestone of the programme will be to move to ISO 20022 messaging on a like-for-like basis in June 2022, followed by enhanced ISO 20022 in February 2023. This move will culminate in full adoption of enhanced data; this includes mandated use of purpose codes and legal entity identifiers (LEIs) between financial institutions from 2024 onwards. The BoE will then migrate to the new core settlement platform in later 2023, which Ms Cleland states is only the beginning of the continuous evolution of the service to drive value for the industry. Ms Cleland states that the BoE will consult in early 2022 on a range of proposals for enhanced functionality that will enable market participants to offer faster, cheaper and more efficient payment services. This includes liquidity facilities; improved liquidity functionality can help to alleviate funding costs in cross-border payments through more efficient liquidity allocation and usage. Ms Cleland also highlights that the renewed RTGS service will also: (a) enable wider access to central bank money with a more efficient and streamlined onboarding process for new participants; and (b) have the capability to operate up to 24/7, if required and supported by industry, in the future. 


Prudential regulation

EBA RTS on risk weighted exposure amounts for exposures towards collective investment undertakings

On 24 November, the EBA published final draft regulatory technical standards (RTS) specifying the methodology to apply to calculate the risk-weighted exposure amounts, in the context of the mandate-based approach when there are some missing inputs. These final draft RTS will contribute to the calculation of own funds requirements for the exposures in the form of units or shares in collective investment undertakings under the Standardised Approach for credit risk. In particular, the final draft RTS provide clarification on the regulatory treatment for missing inputs when the underlying risk of derivatives is unknown, as well as for the computation of the exposure value for counterparty credit risk. The RTS also account for situations where the notional amount of a netting set needs to be computed or for when the identification of netting sets is not feasible. Finally, these draft RTS explain what is considered as insufficient information versus missing inputs and clarify whether market measures provide sufficient information for the application of the mandate-based approach for exposures to CIUs.


Press release

FSB 2021 list of global systemically important banks

On 23 November, the FSB published its 2021 list of globally systemic important banks (G-SIBs) using end-2020 data and an assessment methodology designed by the BCBS. The 30 banks on the list remain the same as the 2020 list, although certain banks have changed buckets. The BCBS has published: (i) updated denominators used to calculate banks’ scores; (ii) the thresholds used to allocate the banks to buckets; (iii) the values of the twelve high-level indicators of all banks in the main sample used in the G-SIB scoring exercise; and (iv) the links to the public disclosures of all banks in the full sample of banks assessed. In the near term, the BCBS will review the implications of developments related to the European Banking Union for the G-SIB methodology. In particular, this will include a targeted review of the treatment of cross-border exposures within the Banking Union on the G-SIB methodology.

Press release

Updated denominators


High level indicator values

EBA final revised guidelines on internal governance under IFD

On 22 November, the EBA published its final revised guidelines on internal governances for investment firms under the IFD. The IFD contains specific governance requirements for investment firms in parallel to and consistently with the ones already applicable under CRD. The guidelines are consistent as far as possible with their respective guidelines under CRD. They are addressed to investment firms that do not meet all of the conditions for qualifying as small and non-interconnected investment firms under Article 12(1) IFR and competent authorities. These requirements apply regardless of the investment firms’ governance structures (unitary board, dual board or other structure). The guidelines complete the various governance provisions in the IFD, by specifying the tasks, responsibilities and functioning of the management body, and the organisation of investment firms, including the need to create transparent structures that allow for the supervision of all their activities. The guidelines also specify in more detail the requirements under the IFD and aim to ensure the sound management of risks across all three lines of defence and, in particular, set out detailed requirements for the second line of defence (the compliance function and the independent risk management where applicable) and, the third line of defence (the internal audit function), where applicable.

Press release

Final report

EBA final revised guidelines on sound remuneration policies under IFD

On 22 November, the EBA published its final revised guidelines on sound remuneration policies for investments firms under the IFD. The guidelines are consistent as far as possible with their respective guidelines under CRD. Relevant differences between IFD and CRD (e.g., the absence of a bonus cap and differences in instruments and the length of deferral periods) have been taken into account. They are addressed to investment firms that do not meet all of the conditions for qualifying as small and non-interconnected investment firms under Article 12(1) IFR and competent authorities. The guidelines specify further the requirements on remuneration policies in the IFD with regard to the respective governance arrangements and processes which should be applied when remuneration policies for all staff and for identified staff are implemented. The guidelines specify the elements that investment firms should implement in order to ensure that remuneration policies are sound and gender neutral in accordance with the IFD and respect the principle of equal pay for male and female workers for equal work or work of equal value. The main part of the guidelines focuses on the specific provisions that apply to investment firms’ remuneration policies for identified staff, in particular, the alignment of the variable remuneration with the risk profile of the investment firms or the assets they manage is crucial. The guidelines will be applicable as of 30 April 2022.

Press release

Final report

Amending Implementing Regulation on benchmark portfolios reporting under CRD IV

On 19 November, Commission Implementing Regulation (EU) 2021/1971 amending Implementing Regulation (EU) 2016/2070 laying down implementing technical standards (ITS) for templates, definitions and IT-solutions to be used by institutions when reporting to the EBA and competent authorities under Article 78(2) of CRD IV was published in the OJ. Commission Implementing Regulation (EU) 2016/2070 specifies the reporting requirements for institutions to enable the competent authorities to monitor the range of risk weighted exposure amounts or own funds requirements for the exposures or transactions in the benchmark portfolio resulting from the internal approaches of those institutions, and to assess those approaches. To improve the quality of the date reported and to obtain more accurate benchmark values, the amending Implementing Regulation, namely, decreases the number of benchmark portfolios to be reported, simplifies their design and provides stable definitions. It enters into force on 9 December (20 days after its publication in the OJ).


Sustainable finance

IOSCO recommendations on oversight of ESG ratings and data product providers

On 23 November, IOSCO published a final report setting out recommendations in relation to the oversight of ESG ratings and data product providers. As this market does not typically fall within the remit of securities regulators, IOSCO suggests that regulators could consider focusing greater attention on the use of ESG ratings and data products and the activities of ESG rating and data products providers in their jurisdictions. The recommendations start with a proposal that regulators could consider focusing greater attention on the use of ESG ratings and data products and the activities of ESG rating and data products providers in their jurisdictions. This is followed by a set of recommendations addressed to ESG ratings and data products providers, setting out that they could consider a number of factors related to issuing high quality ratings and data products, including publicly disclosed data sources, defined methodologies, management of conflicts of interest, high levels of transparency, and handling confidential information. The recommendations also suggest that users of ESG ratings and data products could consider conducting due diligence on the ESG ratings and data products that they use within their internal processes. The recommendations close with suggestions that ESG ratings and data products providers, and entities subject to assessment by ESG ratings and data products providers could consider to improve information gathering processes, disclosures and communication between providers and entities subject to assessment.

Press release


ECB report on supervisory review of banks’ approaches to manage climate and environmental risks

On 22 November, the ECB published a report on its review of banks' approaches to managing climate and environmental risks. The ECB requested 112 institutions (those under the Single Supervisory Mechanism) to conduct a self-assessment of their current practices against the ECB’s 13 supervisory expectations on climate-related and environmental risks (C&E risks) and to submit implementation plans detailing how and when they would bring their practices into line. The key findings include: (i) none of the institutions are close to fully aligning their practices with the supervisory expectations. They themselves deem 90% of their reported practices to be only partially or not at all aligned with the ECB’s supervisory expectations. The expected completion timelines submitted to the ECB show that many institutions will not have practices in place that are aligned with the ECB supervisory expectations in the near future; (ii) virtually all institutions that performed a thorough materiality assessment expect C&E risks to have a material impact on their risk profile in the coming three to five years; (iii) while steps are being taken to adapt policies and procedures, few institutions have put in place C&E risk practices with a discernible impact on their strategy and risk profile; and (iv) most institutions have a blind spot for physical risks and other environmental risk drivers, such as biodiversity loss and pollution. In the report the ECB identified a set of good practices across different expectations that originated from institutions spanning a range of business models and sizes. The ECB recognises that the challenges linked to the integration of C&E risks into strategies, governance and risk management arrangements are constantly evolving. Therefore, the ECB is committed to continuing its dialogue with the institutions so that they keep on strengthening their management of C&E risks. The ECB expects all institutions to take decisive action to address the shortcomings set out in a dedicated supervisory feedback letter. A supervisory dialogue with each institution was conducted by Joint Supervisory Teams between August and September. For some institutions, a qualitative requirement may be communicated as part of the 2021 Supervisory Review and Evaluation Process.


ESMA speech on ESG reporting, risk management, strategy and responsibility

On 19 November, ESMA published a speech given by Verena Ross, ESMA Chair, on ESG reporting, risk management, strategy and responsibility. Ms Ross addresses three aspects that, on the one hand, are needed to support effective capital allocation decisions targeted at sustainable investments and, on the other, are needed to counter the risk of greenwashing: (i) transparent and reliable disclosures; (ii) a good understanding of the underlying sustainability profile of target investments; and (iii) sound board accountability and stakeholder involvement on sustainability commitments. Points of interest include: (a) ESMA considers that countering green washing is central to the objective of a sound regulatory regime and to securing the overall credibility of a more sustainable financial system; (b) ESMA considers that international cooperation is key to ensuring that consistent measures are taken to protect investors and secure financial stability as the demand and need for sustainability-related financial products increases; (c) ESMA is working with EIOPA and the EBA on a workstream to co-ordinate and support initiatives to enhance financial literacy, which includes sustainable finance. ESMA is concerned that many retail investors are not able to fully assess the risk-return profile of simple financial instruments, which is complicated further by the sustainability dimension; and (d) in the area of governance, one key development Ms Ross considers will be important is to find the appropriate mechanisms to make sure that issuers and their directors take into account a broader set of stakeholder interests in their corporate decisions compared to what is currently the case.


Other developments

EC communication on progress on capital markets union action plan and 2022 deliverables

On 25 November, the EC published a communication on the progress it has made in implementing the 2020 capital markets union (CMU) action plan and selected deliverables for 2022. An Annex accompanies the communication which further discusses the progress made and next steps in relation to actions announced in the 2020 action plan. The EC’s deliverables for 2022 include: (i) a listings review – the EC intends to simplify the EU’s rules and plans to adopt a legislative proposal in H2 2022; (ii) an open finance framework – the EC intends to present a legislative proposal and adopt a supervisory data strategy; and (iii) harmonisation of corporate insolvency framework and procedures – the EC intends to propose an initiative by Q3 2022, subject to an impact assessment.

CMU package webpage




Press release