ESMA published the annual report for 2019, along with a revised version the annual work program. The annual report sets out key actions taken in 2019 while the updated work program describes the planned work of ESMA for 2020. The work program covers the additional work of ESMA on its immediate reaction to the COVID-19 crisis and indicates potential re-prioritization regarding ongoing and future mandates. As part of the activities under the work program, ESMA will work with other relevant EU authorities to develop—within the determined timelines—the standards for the new prudential framework for investment firms and the disclosure provisions for sustainable investments.
The work program highlights that, as part of the re-prioritization exercise, ESMA decided to prolong the consultation period for some consultations, to allow market participants to be able to provide responses while ensuring business continuity during the pandemic. As an immediate response to the COVID-19 situation, until June, the focus has been on maintaining markets that are open and orderly and that allow prices to adjust and liquidity to be provided. To respond adequately to the repercussions of COVID-19 situation on the financial markets, a complete assessment of the ESMA activities for 2020 was undertaken. Each activity in the originally planned 2020 work program was evaluated and assessed against the criteria of relevance and urgency for the market and against the impact on stakeholders. On the basis of this evaluation, each activity was classified into high, medium, or low priority. This resulted in revisions to the original work program for 2020. The work program revisions include the addition of new high-priority items as well as the removal or delay of certain items from the work program.
The revised work program highlights that the 2020 supervisory convergence priorities will be to implement strengthened convergence and co-ordination powers under the new founding regulation and foster exchanges on supervisory and enforcement matters. Additionally, ESMA will
- Monitor market developments to drive the convergence initiatives for financial innovation, concentrating on regulation and supervision of initial coin offerings and crypto assets, innovative fintech business models, national innovation hubs and regulatory sandboxes, and cyber security and cyber resilience.
- Continue to work with the national competent authorities to ensure a coordinated European response to the COVID-19 crisis. In response to the COVID-19 crisis, ESMA will continue to conduct necessary supervisory convergence work such as the already issued public statements related to the application of IFRS 9 on Financial instruments, financial reporting deadlines for issuers, Alternative Performance Measures, and reflecting the effects of COVID-19 in half-yearly financial statements of listed issuers.
- Develop, or will co-operate with EBA on the development of, technical standards and other legal acts required under the new prudential framework for investment firms. It will also ensure that the relevant technical standards as part of the investment firms framework are delivered to EC within the deadline.
- Work to strengthen and improve the disclosure of information by manufacturers of sustainable financial products and financial advisors toward end investors. It will develop, jointly with EBA and EIOPA, the implementing and regulatory technical standards on the disclosure provisions for sustainable investments and these standards are to be delivered in January 2021. Considering the increasing relevance of sustainability issues (including environmental, social, and governance factors), ESMA will continue to closely monitor the developments in this area, to engage with stakeholders, and to promote the creation of a common supervisory culture with regard to non-financial reporting, although the decision on a specific supervisory tool will not be taken in 2020.
- Monitor the implementation of the requirements related to the European Single Electronic Format (ESEF) and consider if there is a need to provide further assistance to market participants. ESMA will support national competent authorities in the preparation of future supervisory activities related to, and leveraging on, electronic reports, to ensure the highest possible convergence across all EU jurisdictions in the application of the ESEF Regulation by issuers and in its supervision by the national competent authorities.
In the activity of assessing risks, ESMA will ensure that it continues to provide appropriate and timely risk assessments as part of the EU response to the COVID-19 crisis. ESMA still has several regulatory tasks under the EC action plans on the Capital Markets Union, fintech, and sustainable finance. It will prioritize the areas of its Single Rulebook work that contribute to those action plans. ESMA will also continue the registration and supervision of credit rating agencies and Securitization Repositories, in addition to the recognition of third-country central counterparties and central securities depositories. ESMA will continue to focus its supervisory work on the rating processes, the IT processes, the governance, the internal controls, and the information security, also assessing potential risks identified in these areas. Finally, ESMA will focus on engaging with credit rating agencies under its direct supervision to assess the impact of COVID-19 crisis on their operations and to assess the possible impact of ratings actions.
Keywords: Europe, EU, Banking, Insurance, Securities, Sustainable Finance, Single Rulebook, Fintech, Work Program, Annual Report, COVID-19, ESG, IFR, ESEF Regulation, Non-Financial Reporting, NFRD, Disclosures, IFRS 9, ESMA
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