ESMA Integrates Latest IFRS Updates into ESEF Taxonomy

By Regulatory News

June 07, 2019

Regulatory Reporting: EU

ESMA published a draft amendment to the regulatory technical standards on the European Single Electronic format (ESEF) to update the core taxonomy to be used for ESEF reporting. The core taxonomy currently included in the regulatory technical standards on the ESEF is the 2017 IFRS Taxonomy. This draft amendment aims to replace that version with the most recent one published by the IFRS Foundation in March 2019. This update is a purely technical amendment to the original regulatory technical standards on the ESEF.

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.

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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)

These regulatory technical standards published by ESMA amend the Delegated Regulation (EU) 2018/815, which was published in the Official Journal of the European Union on May 29, 2019. The ESEF taxonomy is based on the IFRS Taxonomy. As the IFRS standards and taxonomy evolve, the regulatory technical standards on ESEF need to evolve accordingly to provide preparers with the most relevant ESEF taxonomy for tagging IFRS consolidated financial statements. This will promote electronic reporting that is up-to-date with the applicable reporting standards, thus facilitating implementation of the tagging requirements and ensuring the highest comparability of filings for end-users at the European and global levels. The regulatory technical standards on ESEF will be amended annually to reflect updates to the IFRS Taxonomy published by the IFRS Foundation. ESMA submitted the final report on the regulatory technical standards to EC and EC has three months to decide whether to endorse the technical standard.

The regulatory technical standards on ESEF will be amended on a yearly basis to reflect updates to the IFRS Taxonomy published by the IFRS Foundation. Based on article 4(7) of the revised Transparency Directive, ESMA had developed the draft regulatory technical standards specifying the single electronic reporting format in which issuers should prepare their annual financial reports from January 01, 2020. The regulatory technical standards on ESEF established that the taxonomy to be used to mark-up IFRS consolidated financial statements shall be an extension of the IFRS Taxonomy, which is prepared and annually updated by the IFRS Foundation.

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Keywords: Europe, EU, Banking, Insurance, Securities, Taxonomy, Regulatory Technical Standards, ESEF, Reporting, IFRS, ESMA

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