Key Regulatory Topics: Weekly Update 20-25 Aug 2021
25 August 2021
Amending Delegated Regulation on requirements for assets received by MMFs as part of reverse repurchase agreements published in OJ
On 23 August, Commission Delegated Regulation (EU) 2021/1383 amending Delegated Regulation (EU) 2018/990 with regards to requirements for assets received by money market funds (MMFs) as part of reverse repurchase agreements was published in the OJ. In accordance with Article 2 of Commission Delegated Regulation (EU) 2018/990 eligible investments in reverse repurchase agreements by managers of MMFs are subject to supplementary qualitative and quantitative requirements, including a specific adjustment to the value of an asset. However, those requirements do not apply to transactions entered into with credit institutions, investment firms and insurance undertakings that are established in the EU or that are covered by an equivalence decision. The amending Regulation specifies the relevant provisions in the CRR, MiFID II and Solvency II on which equivalence decisions should be adopted for the exemption to be applied in relation to these entities. The new Delegated Regulation comes into force on 12 September (twenty days following its publication in the OJ).
Markets and markets infrastructure
ESMA consults on suitability assessments of Data Reporting Services Providers (DRSP) management body members
On 24 August, ESMA began consulting on draft regulatory technical standards (RTS) under MiFIR regarding suitability assessments of DRSP management body members. ESMA proposes to introduce requirements covering the following areas: (i) good repute, honesty and integrity; (ii) sufficient time commitment; (iii) knowledge, skills and experience; (iv) independence; (v) induction and training; (vi) diversity; and (vii) record-keeping. The consultation builds on the existing ESMA Guidelines regarding the management body of market operators and DRSPs, taking into account different roles and functions carried out by them and the need to avoid conflicts of interest between management body members and users of the Approved Publication Arrangement, Consolidated Tape Provider or Approved Reporting Mechanism. The deadline for comments is 24 September. ESMA expects to finalise and submit its draft RTS to the EC by Q1 of 2022.
Payment systems and payment services
FCA does not incorporate EBA’s view of inherence for the purpose of SCA into Approach Document
On 20 August, the FCA announced that it has decided not to incorporate the EBA’s view of inherence for the purpose of SCA in the FCA’s approach document. The EBA published its view of inherence for the purpose of SCA in its June 2019 Opinion. Inherence (something the user is) is 1 of the 3 authentication elements defined under the PSRs, alongside knowledge (something only the user knows) and possession (something the user possesses). The FCA consulted in CP21/3 on amending its Approach Document to reflect the EBA’s view. The FCA recognise that some firms are currently developing SCA solutions and requested a decision on this question as soon as possible, however it will publish its rationale for this decision and a summary of consultation responses in a policy statement later this year. The FCA reminds firms that they must ensure that any individual SCA inherence solution they use complies with regulatory requirements, including Article 8 of the FCA’s Technical Standards for Strong Customer Authentication.
EBA peer review on prudential assessment of qualifying holdings
On 24 August, the EBA published a peer review on the prudential assessment of qualifying holdings, aimed at assessing competent authorities’ application of the Joint ESAs Guidelines on the prudential assessment of the acquisition of qualifying holdings. Overall, the review found that competent authorities have largely or fully applied the ESAs Guidelines, which have therefore significantly contributed to the convergence of assessment practices of proposed acquisition or increase of qualifying holdings across the EU. The review also provides early indications as to the areas in which the ESAs Guidelines could provide additional guidance to the competent authorities, with a view to fostering convergence of practices including: (i) review and enhancement of guidance on the fifth assessment criterion relating to ML/TF risk; (ii) additional guidance on the assessment of large and complex acquisitions, so as to achieve a more proportionate and efficient assessment; (iii) review of the guidance on the application of the proportionality principle; and (iv) additional guidance on the content of documents and information to be provided with an application, in order to better explain supervisory expectations and speed up the pre-application phase.
Recovery and resolution
FSB framework for information from FMI intermediaries to support resolution planning and revised questionnaire
On 20 August, the FSB published a framework to help financial market infrastructure (FMI) intermediaries better understand what information clients and their resolution authorities (RAs) may need from them to prepare their resolution plans. The framework provides a checklist of baseline information that clients of FMI intermediaries should at a minimum cover in their contingency planning and that they may need to obtain from, or bilaterally discuss with, their critical FMI intermediaries. The framework thus does not set new requirements – it merely clarifies the topics that would typically be part of information requests from clients and/or from clients’ RAs. This could potentially allow them to identify opportunities to streamline their response process, reducing the resources required to provide this information. The framework covers: (i) the FMI services provided by the FMI intermediary; (ii) the conditions governing suspension or termination; (iii) the phase prior to resolution, during signs of distress at the client; (iv) the resolution phase; and (v) the case that the FMI intermediary itself is in resolution. The onus is on the client (FMI service user) and/or its RA to request any information and clarifications it may need from FMI service providers. The FSB emphasises that FMI intermediaries should be prepared to respond to such information requests within reasonable deadlines as mutually agreed. The FSB will organise an outreach webinar for stakeholders on this Framework on 16 September. The first experience with this Framework will be evaluated in the course of 2022. FMI service providers and FMI service users (clients), as well as other stakeholders, will then have the opportunity to provide feedback and suggestions on the framework itself and the process. The FSB has also updated its questionnaire that aims to streamline information collection to support resolution planning. It covers general information on the FMI and its legal structure; the rulebook/contractual provisions regarding termination; and arrangements and operational processes to facilitate continued access in resolution. It is designed to reduce the burden of duplicative information-gathering efforts by streamlining the collection of certain baseline information relevant to continuity of access in resolution.