Featured Product

    ESAs Respond to EC Proposal on DORA, Suggest Improvements

    February 09, 2021

    ESAs addressed a letter to certain relevant EU entities expressing views on the EC proposal on the Digital Operational Resilience Act, also called DORA. In the letter, ESAs highlight their agreement with the main principles of DORA, which EC proposed in September 2020, and express support for the establishment of an oversight framework to cover the technology (ICT) services that critical third-party providers offer to the financial sector. ESAs also suggest ways to most efficiently take forward important aspects of the governance and operational processes of the oversight framework for critical third-party providers and the application of the proportionality principle in DORA.

    In their letter, ESAs highlight that the proposed oversight framework is the first concrete initiative to address the complex issue of the dependencies on critical third-party providers in the financial sector, including monitoring third-party concentration risks. ESAs also emphasize the necessity of clearly communicating that the scope of this framework is limited to the provider activities in relation to financial entities. In this context, ESAs discuss the challenges for the governance and operation of the proposed sectoral oversight framework and suggest the following ways to address these challenges:

    • Need for more streamlined and effective governance. ESAs propose that co-legislators should consider a model that permits stronger ESA cooperation through the creation of a joint-ESAs executive body, which would integrate the role of the Oversight Forum and be responsible for the overall oversight work for cross-sectoral critical third-party providers. Necessary powers could be allocated to this executive body by the legislation to enhance its decision-making role and to ensure a unified and harmonized approach across the ESAs. In addition, the legislation could clarify the potential designation of entities providing such services to financial entities across the remit of a single ESA, along with the governance model to be applied in these cases. ESAs also propose that the co-legislators consider establishing a cross-ESAs team to work on the oversight of critical third-party providers.
    • Need for coherence between oversight recommendations and follow-up. The letter proposes far greater involvement for the ESAs in the follow-up process and the introduction of effective enforcement measures at EU level that can be applied directly to the critical third-party providers. Enforcement actions against a third-party provider could be endorsed by competent authorities through the Board of Supervisors of one or more of the ESAs. Moreover, DORA could allow for market transparency tools to strengthen the oversight framework and to encourage these providers to adhere to recommendations.
    • Need for adequate resources. DORA envisages significant new ongoing work. For instance, it proposes ongoing policy-related work in the form of regular reporting and several tasks relating to ICT-related incident reporting, cooperation with structures and authorities established by the NIS Directive, financial cross-sector exercises, communication, and cooperation. Thus, ESAs strongly recommend a significant increase to the allocation of new resources, including more senior roles, for the new ongoing tasks proposed under DORA.
    • Need for a more proportionate DORA. The current DORA proposal excludes only micro-enterprises from the application of certain requirements and does not make any reference to sectoral legislation when defining the financial entities in scope. Given this, ESAs suggested a more comprehensive inclusion of the principle of proportionality in a more flexible way across the legal act.

     

    Related Link: ESAs Letter (PDF)

     

    Keywords: Europe, EU, Banking, Insurance, Securities, DORA, Digital Operational Resilience Act, Third Party Providers, Cyber Risk, Fintech, Operational Risk, Regtech, Cloud Computing, ESAs

    Related Articles
    News

    APRA Finalizes Reporting Standard for Operational Risk Requirements

    APRA finalized the reporting standard ARS 115.0 on capital adequacy with respect to the standardized measurement approach to operational risk for authorized deposit-taking institutions in Australia.

    March 03, 2021 WebPage Regulatory News
    News

    ECB Publishes Guide for Determining Penalties for Regulatory Breaches

    ECB published a guide that outlines the principles and methods for calculating the penalties for regulatory breaches of prudential requirements by banks.

    March 02, 2021 WebPage Regulatory News
    News

    MAS Sets Out Good Practices to Manage Operational Risks Amid COVID

    MAS and The Association of Banks in Singapore (ABS) jointly issued a paper that sets out good practices for the management of operational and other risks stemming from new work arrangements adopted by financial institutions amid the COVID-19 pandemic.

    March 02, 2021 WebPage Regulatory News
    News

    ACPR Announces New Data Collection Application for Banks and Insurers

    ACPR announced that a new data collection application, called DLPP (Datalake for Prudential), for collecting banking and insurance prudential data will go into production on April 12, 2021.

    March 02, 2021 WebPage Regulatory News
    News

    BCB Maintains CCyB at 0%, Initiates First Cycle of Regulatory Sandbox

    BCB announced that the Financial Stability Committee decided to maintain the countercyclical capital buffer (CCyB) for Brazil at 0%, at least until the end of 2021.

    March 02, 2021 WebPage Regulatory News
    News

    EBA Consults on Pillar 3 Disclosure Standards for ESG Risks Under CRR

    EBA is consulting on the implementing technical standards for Pillar 3 disclosures on environmental, social, and governance (ESG) risks, as set out in requirements under Article 449a of the Capital Requirements Regulation (CRR).

    March 01, 2021 WebPage Regulatory News
    News

    ESAs Issue Advice on KPIs on Sustainability for Nonfinancial Reporting

    ESAs Issue Advice on KPIs on Sustainability for Nonfinancial Reporting

    March 01, 2021 WebPage Regulatory News
    News

    EIOPA Launches Study on Non-Life Underwriting Risk in Internal Models

    EIOPA has launched a European-wide comparative study on non-life underwriting risk in internal models, also kicking-off of the data collection phase.

    March 01, 2021 WebPage Regulatory News
    News

    SRB Publishes Overview of Resolution Tools Available in Banking Union

    SRB published an overview of the resolution tools available in the Banking Union and their impact on a bank’s ability to maintain continuity of access to financial market infrastructure services in resolution.

    March 01, 2021 WebPage Regulatory News
    News

    EU Amends CRD4 and CRD5 as Part of Capital Markets Recovery Package

    EU published Directive 2021/338, which amends the Markets in Financial Instruments Directive (MiFID) II and the Capital Requirements Directives (CRD 4 and 5) to facilitate recovery from the COVID-19 crisis.

    February 26, 2021 WebPage Regulatory News
    RESULTS 1 - 10 OF 6650