April 09, 2019

ESAs published the Joint Committee annual report for 2018. The report provides a detailed account of the joint achievements in the past year. The report highlights the continued efforts of ESAs in overseeing market developments and cross-sectoral risks, including those posed by Brexit. The focus of the Committee on Brexit-related issues increased, as ESAs continued the preparation for withdrawal of UK from EU.

The report notes that the Joint Committee continued as an important forum for discussions on market developments and in-depth analysis of emerging risks, helping to identify the main areas of supervisory concern across EU. As uncertainties regarding the withdrawal of UK from EU grew, the impact of a potential cliff-edge scenario, ongoing supervisory matters, and future cooperation with UK authorities became focal points for the Joint Committee. These escalating uncertainties were reflected in the Joint Committee’s biannual risk reports, which also addressed other necessary measures to ensure consistent EU supervisory oversight in light of Brexit. The report further noted that ESAs focused on ensuring the smooth implementation of the new rules related to the Packaged Retail and Insurance-based Investment Products (PRIIPs) Regulation. To this end, additional questions and answers were published to clarify the application of the rules and to promote common supervisory approaches and practices. 

In the field of financial innovation, the Joint Committee published a report on use of Big Data; the report presented the benefits and risks of allowing the development of products tailored to consumer needs in recurring to big data analytics and processes. The Joint Committee also conducted a monitoring exercise on the evolution of automation in financial advice. The report highlights that ESAs also began working on several joint actions under FinTech Action Plan. The first joint deliverable from this Action Plan was the joint report on Regulatory Sandboxes and Innovation Hubs, which set out a comparative analysis of the innovation facilitators established to date in EU and outlined observed practices for the design and operation of innovation facilitators. 

In addition, the annual report provides a detailed account of the two joint draft regulatory technical standards by ESAs to amend the standards on clearing obligation and risk mitigation techniques for non-cleared over-the-counter (OTC) derivatives. These standards extend the special treatment associated with covered bonds to simple, transparent and standardized (STS) securitizations, to ensure a level playing field with covered bonds. The report also provides information related to Implementing Regulations on credit assessments by External Credit Assessment Institutions (ECAIs).

 

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Keywords: Europe, EU, Banking, Insurance, Securities, Brexit, Fintech, Securitization, PRIIPs, Annual Report, ESAs