Danish FSA Assesses Fully Sustainable Funds, Issues Other Updates
The Danish Financial Supervisory Authority (DFSA) published the results of a thematic survey on the sustainability information for eight funds with sustainable investments (also referred to as "fully sustainable" funds). DFSA also updated the principles for determining impairment liabilities (“NEP requirements”) for the non-systemically important financial institutions, set out requirements for the application process of new and existing providers of crowdfunding services to obtain a permit, and proposed draft guidance for an Executive Order on good practices for housing credit.
Below are the key details of the recent developments:
- DFSA conducted a thematic survey to examine whether investors receive the sustainability information to which they are entitled and whether this information is provided in a clear, complete, and understandable manner. The investment management companies must, among other things, ensure that the fund discloses which sustainability goals it contributes to through investments (the sustainable investment goals), how the fund ensures that the actual investments are in line with the goals, and which sustainability risks the investor assumes. The results show that, overall, the investment management companies for the eight funds have not ensured that the information on sustainability has been provided in a clear, adequate and understandable way. DFSA finds that the prospectuses for several funds contain insufficient information on how to ensure that the investments do not cause significant damage to any social or environmental objectives. DFSA also notes that the document with central investor information (KIID) for several of the funds either does not contain a description of the funds' sustainable investment objectives or contains a description of the objectives which is not consistent with the information in the prospectus. Based on the insufficient information in the prospectuses and the KIID, DFSA has issued orders to the investment management companies of the funds to ensure that the information requirements are complied with. During 2023, DFSA will also publish a memo which describes what DFSA has identified in the study as good practice in the area.
- DFSA issued a memo that describes the updated principles for determining impairment liabilities (NEP requirements) for the non-systemically important financial institutions, including the calculation method and the phasing-in requirements. The principles for determining the NEP requirements for non-systemically important financial institutions have been updated in connection with the implementation of the Bank Recovery and Resolution Directive (BRRD2) in Danish law. The principles reflect current practice and contain only the necessary adjustments as a result of BRRD2.
- DFSA published a memo that sets out requirements for the application process of new and existing providers of crowdfunding services to obtain a permit from the national supervisory authority before offering their services to the public. The memo states that new and existing crowdfunding service providers must obtain a permit from the DFSA by November 10, 2023 at the latest in order to continue to offer crowdfunding services. A crowdfunding service provider operates a digital platform open to the public to match or facilitate the matching of potential investors or lenders with businesses seeking funding.
- DFSA, is seeking comments, until March 21, 2023, on draft guidance for an Executive Order on good practice for housing credit. The draft guidance replaces guidance no. 9619 of September 10, 2020 for an executive order on good practice for housing credit. The amendment to the draft guidance covers introduction of an example where the payment requirement can be waived in connection with the purchase of a co-operative home in a co-operative housing association that was formed by converting a rental property where the obligation to offer is applicable, including a number of language changes and minor adaptations.
Related Links (in Danish)
Keywords: Europe, Denmark, Banking, Sustainable Finance, Investment Firms, Sustainability Risk, BRRD2, NEP Requirements, Impairments, Systemic Risk, Crowdfunding Service Providers, Lending, Credit Risk, Mortgage Lending, Danish FSA
Featured Experts
Blake Coules
Across 35 years in banking, Blake has gained deep insights into the inner working of this sector. Over the last two decades, Blake has been an Operating Committee member, leading teams and executing strategies in Credit and Enterprise Risk as well as Line of Business. His focus over this time has been primarily Commercial/Corporate with particular emphasis on CRE. Blake has spent most of his career with large and mid-size banks. Blake joined Moody’s Analytics in 2021 after leading the transformation of the credit approval and reporting process at a $25 billion bank.
Previous Article
US Regulators Issue Reporting Updates for Banks and Credit UnionsRelated Articles
BIS and Central Banks Experiment with GenAI to Assess Climate Risks
A recent report from the Bank for International Settlements (BIS) Innovation Hub details Project Gaia, a collaboration between the BIS Innovation Hub Eurosystem Center and certain central banks in Europe
Nearly 25% G-SIBs Commit to Adopting TNFD Nature-Related Disclosures
Nature-related risks are increasing in severity and frequency, affecting businesses, capital providers, financial systems, and economies.
Singapore to Mandate Climate Disclosures from FY2025
Singapore recently took a significant step toward turning climate ambition into action, with the introduction of mandatory climate-related disclosures for listed and large non-listed companies
SEC Finalizes Climate-Related Disclosures Rule
The U.S. Securities and Exchange Commission (SEC) has finalized the long-awaited rule that mandates climate-related disclosures for domestic and foreign publicly listed companies in the U.S.
EBA Proposes Standards Related to Standardized Credit Risk Approach
The European Banking Authority (EBA) has been taking significant steps toward implementing the Basel III framework and strengthening the regulatory framework for credit institutions in the EU
US Regulators Release Stress Test Scenarios for Banks
The U.S. regulators recently released baseline and severely adverse scenarios, along with other details, for stress testing the banks in 2024. The relevant U.S. banking regulators are the Federal Reserve Bank (FED), the Federal Deposit Insurance Corporation (FDIC), and the Office of the Comptroller of the Currency (OCC).
Asian Governments Aim for Interoperability in AI Governance Frameworks
The regulatory landscape for artificial intelligence (AI), including the generative kind, is evolving rapidly, with governments and regulators aiming to address the challenges and opportunities presented by this transformative technology.
EBA Proposes Operational Risk Standards Under Final Basel III Package
The European Union (EU) has been working on the final elements of Basel III standards, with endorsement of the Banking Package and the publication of the European Banking Authority (EBA) roadmap on Basel III implementation in December 2023.
EFRAG Proposes XBRL Taxonomy and Standard for Listed SMEs Under ESRS
The European Financial Reporting Advisory Group (EFRAG), which plays a crucial role in shaping corporate reporting standards in European Union (EU), is seeking comments, until May 21, 2024, on the Exposure Draft ESRS for listed SMEs.
ECB to Expand Climate Change Work in 2024-2025
Banking regulators worldwide are increasingly focusing on addressing, monitoring, and supervising the institutions' exposure to climate and environmental risks.
