Featured Product

    IOSCO-GEMC Publishes Recommendations Related to Sustainable Finance

    June 05, 2019

    Growth and Emerging Market Committee (GEMC) of IOSCO published a report that sets forth recommendations related to the development of sustainable finance in emerging markets and the role of securities regulators in this area. Among other things, the recommendations include requirements for reporting and disclosure of material Environmental, Social, and Governance (ESG) risks, aimed at enhancing transparency.

  • The information to be provided by a third party seeking authorization to assess the compliance of securitizations with the STS criteria provided for in Securitization Regulation should enable a competent authority to evaluate whether and, to what extent, the applicant meets the conditions of Article 28(1) of the Securitization Regulation. An authorized third party will be able to provide STS assessment services across EU. The application for authorization should, therefore, comprehensively identify that third party, any group to which this third party belongs, and the scope of its activities. With regard to the STS assessment services to be provided, the application should include the envisaged scope of the services to be provided as well as their geographical scope, particularly the following:

    • To facilitate effective use of the authorization resources of a competent authority, each application for authorization should include a table clearly identifying each submitted document and its relevance to the conditions that must be met for authorization.
    • To enable the competent authority to assess whether the fees charged by the third party are non-discriminatory and are sufficient and appropriate to cover the costs for the provision of the STS assessment services, as required by Article 28(1)(a) of Securitization Regulation, the third party should provide comprehensive information on pricing policies, pricing criteria, fee structures, and fee schedules.
    • To enable the competent authority to assess whether the third party is able to ensure the integrity and independence of the STS assessment process, that third party should provide information on the structure of those internal controls. Furthermore, the third party should provide comprehensive information on the composition of the management body and on the qualifications and repute of each of its members.
    • To enable the competent authority to assess whether the third party has sufficient operational safeguards and internal processes to assess STS compliance, the third party should provide information on its procedures relating to the required qualification of its staff. The third party should also demonstrate that its STS assessment methodology is sensitive to the type of securitization and that specifies separate procedures and safeguards for asset-backed commercial paper (ABCP) transactions/programs and non-ABCP securitizations.

    The use of outsourcing arrangements and a reliance on the use of external experts can raise concerns about the robustness of operational safeguards and internal processes. The application should, therefore, contain specific information about the nature and scope of any such outsourcing arrangements or use of external experts as well as the third party's governance over those arrangements. Regulation (EU) 2019/885 is based on the draft regulatory technical standards submitted by ESMA to EC.

     

    Related Links

    Effective Date: June 18, 2019

    Press Release
  • Proposed Rule 1
  • Proposed Rule 2
  • Proposed Rule 3
  • Presentation on Regulatory Framework (PDF)
  • Presentation on Resolution Plan Rules (PDF)
  • The report provides the background of the GEMC project on sustainable finance, includes an overview of the regulators’ initiatives in emerging markets, and describes market trends and initiatives. The report identifies the prerequisites for creating an ecosystem that facilitates sustainable finance, such as an appropriate regulatory framework and fit-for-purpose market infrastructure, reporting and disclosure requirements, governance and investor protection guidelines, and mechanisms to address needs and requirements of institutional investors. Finally, the report details the GEMC recommendations (a list of the recommendations can be found in the Appendix) on development of sustainable finance.

    Given the global nature of sustainable instruments, GEMC believes that its recommendations will benefit both issuers and investors by improving the consistency of regulation of sustainable finance in emerging markets. It encourages its members to consider implementation of this guidance in the context of their legal and regulatory frameworks, given the significance of the associated risks and opportunities. The key recommendations include the following

    • Integration by issuers and regulated entities of ESG-specific issues in their overall risk assessment and governance. Issuers and other regulated entities should integrate ESG-specific issues, where these are material, in the overall risk assessment and governance of these entities including at the Board level.
    • Integration by the institutional investors of ESG-specific issues into their investment analysis, strategies, and overall governance. Consistent with their fiduciary duties, institutional investors, including asset managers and asset owners, are encouraged to incorporate ESG-specific issues into their investment analysis, strategies, and overall governance and to take into account material ESG disclosures of the entities in which they invest.
    • ESG-specific disclosures, reporting, and data quality. Regulators should require disclosure with regard to material ESG-specific risks (including transition risks) and opportunities in relation to governance, strategy, and risk management of an issuer.
    • Definition and taxonomy of sustainable instruments. Sustainable instruments should be clearly defined and should refer to the categories of eligible projects and activities that the funds raised through their issuance can be used for.
    • Specific requirements regarding sustainable instruments. Regulators should establish ongoing disclosure requirements regarding the use of the funds raised through the issuance of sustainable instruments including the extent of unutilized funds, if any. Regulation should provide for measures to prevent, detect, and sanction the misuse of funds raised through the issuance of sustainable instruments.
    • Building capacity and expertise for ESG issues. Regulators should analyze the gaps in capacity and expertise with regard to ESG-related issues mentioned in the recommendations and consider targeted capacity building to address these gaps.

     

    Related Links

    Keywords: International, Securities, Banking, Insurance, Pension Funds, Sustainable Finance, ESG, Reporting, Disclosure, Recommendations, GEMC, IOSCO

    Featured Experts
    Related Articles
    News

    MAS Amends Notice 610 on Reporting Templates for Banks in Singapore

    MAS published amendments to Notices 610 and 1003 related to submission of statistics and returns, along with the reporting templates and frequently asked questions (FAQs) associated with these Notices.

    January 24, 2020 WebPage Regulatory News
    News

    HKMA Updates Policy Module on Supervisory Review Process

    HKMA is issuing, by notice in the Gazette, revised versions of two Supervisory Policy Manual modules as statutory guidelines under section 7(3) of the Banking Ordinance. The Supervisory Policy Manual modules are CA-G-5 on “Supervisory Review Process” and SB-2 on “Leveraged Foreign Exchange Trading.”

    January 24, 2020 WebPage Regulatory News
    News

    PRA Amends Pillar 2 Capital Framework for Banks

    PRA published the policy statement PS2/20 that contains the final amendments to the Pillar 2 framework and provides feedback to responses to the consultation paper CP5/19 on updates related to Pillar 2 capital framework.

    January 23, 2020 WebPage Regulatory News
    News

    FED Proposes to Revise Information Collection Under Market Risk Rule

    FED proposed to revise and extend, for three years, FR 4201, which is the information collection under the market risk capital rule.

    January 22, 2020 WebPage Regulatory News
    News

    HKMA Consults on Stay Rules on Financial Contracts Under FIRO

    HKMA published proposals for making rules related to contractual stays on termination rights in financial contracts for authorized institutions under FIRO or the Financial Institutions (Resolution) Ordinance (Cap. 628).

    January 22, 2020 WebPage Regulatory News
    News

    MAS Amends Notices on Minimum Liquid Asset Requirements for Banks

    MAS published amendments to Notices 1015, 613, and 649 related to the minimum liquid assets (MLA) requirements.

    January 21, 2020 WebPage Regulatory News
    News

    APRA Publishes Submission on Fintech and Regtech

    APRA published its submission, to the Senate Select Committee, on financial technology and regulatory technology.

    January 21, 2020 WebPage Regulatory News
    News

    OSFI to Implement Operational Risk Capital Rules for Banks in Q1 2022

    OSFI decided to move domestic implementation of the revised Basel III operational risk capital requirements from the first quarter of 2021 to the first quarter of 2022.

    January 20, 2020 WebPage Regulatory News
    News

    ECB Consults on Guideline on Threshold for Credit Obligations Past Due

    ECB published a draft guideline, along with the frequently asked questions (FAQs), on the definition of the materiality threshold for credit obligations past due for less significant institutions.

    January 20, 2020 WebPage Regulatory News
    News

    OSFI Consults on Instruction Guide for Termination of Pension Plan

    OSFI is consulting on draft revisions to the instruction guide for termination of a defined benefit pension plan.

    January 20, 2020 WebPage Regulatory News
    RESULTS 1 - 10 OF 4526