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
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