ESMA published the work program for supervision in 2020. The work program details the areas of focus for the supervision of credit rating agencies (CRAs), trade repositories, and the monitoring of third-country central clearing counterparties and central securities depositories. ESMA is also preparing for its new supervisory responsibilities under the Securities Financing Transactions Regulation, the Securitization Regulation, the Benchmarks Regulation, and the Markets in Financial Instruments Regulation (MiFIR).
With respect to CRAs, the supervisory focus for 2020 will cover the following activities:
- Proactively identify risks in outstanding credit ratings and take appropriate actions where necessary
- Ensure that CRAs employ robust and well-structured rating processes and understand impact of new technologies on those rating processes
- Monitor the development and review of methodologies to ensure that CRAs use methodologies that are robust, systematic, continuous, and subject to validation, including back-testing
- Address identified concerns on IT and information security in CRAs, including cyber-security and cloud outsourcing
- Ensure credit ratings are accessible and usable for investors
- Engage with CRAs to address identified concerns on the organisational aspects of their control environment that undermine the independence of control functions and enhance compliance’s monitoring activities.
ESMA is preparing its supervisory strategy to take up the supervision of the securitization repositories. The main steps being undertaken are the identification of the key regulatory requirements, the building of knowledge regarding the supervisory mandate, the setup of a data quality framework, and the establishment of internal processes and procedures. ESMA is conferred with additional direct supervisory tasks following the outcome of the review of the European System of Financial Supervision (the ESAs review). From January 01, 2022, ESMA will be the direct supervisor of European critical benchmarks (currently LIBOR, EURIBOR, and EONIA) as well as of the third-country administrators subject to the recognition regime under the Benchmarks Regulation. In addition, ESMA will continue to engage with supervised entities about their preparation for the end of the Brexit implementation period and ensure minimal disruption.
Keywords: Europe, EU, Banking, Securities, Credit Rating Agencies, Cyber Risk, Cloud Computing, Securitization Regulation, Benchmark Regulation, Brexit, ESMA
Previous ArticleEC on First 100 Days of President Ursula von der Leyen Commission
BCBS amended the guidelines on sound management of risks related to money laundering and financing of terrorism (ML/FT).
US Agencies (Farm Credit Administration, FDIC, FED, FHFA, and OCC) finalized changes to the swap margin rule to facilitate implementation of prudent risk management strategies at banks and other entities with significant swap activities.
PRA published a letter that builds on the expectations set out in the supervisory statement (SS3/19) on enhancing banks' and insurers' approaches to managing the financial risks from climate change.
EBA finalized the guidelines on treatment of structural foreign-exchange (FX) positions under Article 352(2) of the Capital Requirements Regulation (CRR).
FSB published a statement on the impact of COVID-19 pandemic on global benchmark transition.
IAIS published the list of Internationally Active Insurance Groups (IAIGs) publicly disclosed by group-wide supervisors.
FED has temporarily revised the reporting form on consolidated financial statements for holding companies (FR Y-9C; OMB No. 7100-0128).
EC launched a consultation on the review of the key elements of Solvency II Directive, with the comment period ending on October 21, 2020.
ECB launched a consultation on the guide that sets out supervisory approach to consolidation projects in the banking sector.
IAIS published technical specifications, questionnaires, and templates for 2020 Insurance Capital Standard (ICS) and Aggregation Method data collections.