ESMA Enforcement Focus Includes ECL, Climate Disclosure, COVID Impact
The European Securities and Markets Authority (ESMA) issued Annual Statement on the European common enforcement priorities for the 2021 annual financial reports. This year’s priorities cover the impact of COVID-19 and climate-related matters, provide guidance on the measurement of expected credit losses, and highlight disclosure obligations pursuant to Article 8 of the Taxonomy Regulation. In addition, issuers are reminded to make the necessary preparations to fulfill the disclosure requirements foreseen by Article 8 of the Taxonomy Regulation, which will come into force as of January 01, 2022.
The areas covered in the enforcement priorities will be considered by national enforcers when monitoring and assessing the 2021 annual financial reports of listed companies. The statement contains priorities linked to financial statements prepared in accordance with the International Financial Reporting Standards (IFRS) and priorities relating to non-financial statements and other considerations related to Alternative Performance Measures. The 2021 key enforcement priorities for financial statements prepared in accordance with IFRS are focused on:
- Careful assessment and transparency in accounting for longer-term impact of the COVID-19 pandemic and the recovery phase
- Consistency between the information disclosed within the IFRS financial statements and the non-financial information concerning climate-related matters, consideration of climate risks, disclosure of any significant judgements and estimation of uncertainty regarding climate risks while Clearly assessing materiality
- Enhanced transparency regarding the measurement of Expected Credit Loss (ECL), particularly in relation to management overlays, significant changes in credit risk, forward-looking information, changes in loss allowances, credit risk exposures and collateral, and the effect of climate-related risk on ECL measurement
The recommendations concerning non-financial information refer to climate-related policies and their outcomes, impact of COVID-19 on sustainability-related goals and non-financial key performance indicators, and information on any structural changes. ESMA and national enforcers will monitor and supervise the application of the recommendations for preparing IFRS financial statements and non-financial statements as well as any other relevant provisions outlined in the Statement, with national enforcers incorporating them into their reviews and taking corrective actions where appropriate. ESMA will collect data on how European listed entities have applied the recommendations in the Statement and will communicate its findings in its report on the enforcement activities of 2022, to be published in Spring 2023.
Related Links
Keywords: Europe, EU, Banking, Securities, Climate Change Risk, Taxonomy Regulation, ECL, Expected Credit Loss, Disclosures, COVID-19, IFRS 9, ESG, ESMA
Featured Experts
Metin Epözdemir
Metin Epözdemir helps European and African banks with design and implementation of credit risk, stress testing, capital management, and credit loss accounting solutions.
Masha Muzyka
CECL, IFRS 9, and IFRS 17 expert; credit risk and insurance risk specialist; strategic planning and credit analytics solutions consultant
Victor Calanog, Ph.D.
Leading economist; commercial real estate; performance forecasting, econometric infrastructure; data modeling; credit risk modeling; portfolio assessment; custom commercial real estate analysis; thought leader.
Previous Article
Chinese Authorities Set Out TLAC Requirements for G-SIBsRelated Articles
EBA Publishes Final Regulatory Standards on STS Securitizations
The European Banking Authority (EBA) published the final draft regulatory technical standards specifying and, where relevant, calibrating the minimum performance-related triggers for simple.
ECB Further Reviews Costs and Benefits Associated with IReF
The European Central Bank (ECB) is undertaking the integrated reporting framework (IReF) project to integrate statistical requirements for banks into a standardized reporting framework that would be applicable across the euro area and adopted by authorities in other EU member states.
EBA Publishes Funding Plans Report, Receives EMAS Certification
The European Banking Authority (EBA) has been awarded the top European Standard for its environmental performance under the European Eco-Management and Audit Scheme (EMAS).
MAS Launches SaaS Solution to Simplify Listed Entity ESG Disclosures
The Monetary Authority of Singapore (MAS) set out the Financial Services Industry Transformation Map 2025 and, in collaboration with the SGX Group, launched ESGenome.
BCBS to Finalize Crypto Rules by End-2022; US to Propose Basel 3 Rules
The Basel Committee on Banking Supervision met, shortly after a gathering of the Group of Central Bank Governors and Heads of Supervision (GHOS), the oversight body of BCBS.
IOSCO Welcomes Work on Sustainability-Related Corporate Reporting
The International Organization of Securities Commissions (IOSCO) welcomed the work of the international audit and assurance standard setters—the International Auditing and Assurance Standards Board (IAASB)
BoE Allows One-Day Delay in Statistical Data Submissions by Banks
The Bank of England (BoE) published a Statistical Notice (2022/18), which informs that due to the Bank Holiday granted for Her Majesty Queen Elizabeth II’s State Funeral on Monday September 19, 2022.
ACPR Amends Reporting Module Timelines Under EBA Framework 3.2
The French Prudential Control and Resolution Authority (ACPR) announced that the European Banking Authority (EBA) has updated its filing rules and the implementation dates for certain modules of the EBA reporting framework 3.2.
ECB Paper Discusses Disclosure of Climate Risks by Credit Agencies
The European Central Bank (ECB) published a paper that examines how credit rating agencies accepted by the Eurosystem, as part of the Eurosystem Credit Assessment Framework (ECAF)
APRA to Modernize Prudential Architecture, Reduces Liquidity Facility
The Australian Prudential Regulation Authority (APRA) announced reduction in the aggregate Committed Liquidity Facility (CLF) for authorized deposit-taking entities to ~USD 33 billion on September 01, 2022.
