Verena Ross of ESMA at Global Capital Markets Conference in London
Verena Ross, Executive Director of ESMA, gave a keynote address at the ICI 2017 Global Capital Markets Conference in London. She spoke about key developments in the asset management sector, with focus on supervisory convergence work on Brexit, costs and charges of investment funds, the revised Markets in Financial Instruments Directive (MiFID II), and money market funds (MMF) regulation.
With regard to Brexit, Ms. Ross said that ESMA is focusing on supervisory convergence in the application of common rules (in single rulebook), as Brexit poses particular challenges to ESMA’s objective of greater convergence. This is because the stated intention of the UK government to withdraw not only from the EU but also the Single Market created the potential for a significant shift of entities and activities from the UK to the EU27, as firms sought to secure their passporting rights. ESMA is carefully analyzing the possible cliff effects if the UK were to withdraw from the EU without any political agreement having been reached. Market participants are particularly concerned about the cooperation arrangements that have to be in place between regulators for certain types of activity. For example, both the Undertakings for the Collective Investment of Transferable Securities (UCITS) Directive and the Alternative Investment Fund Managers Directive (AIFMD) require cooperation arrangements to be in place in case portfolio or risk management is delegated to an entity in a third country.
She then discussed the work of ESMA on the final MMF Regulation, including technical advice on Level 2 measures, implementing technical standards on the reporting requirements, and guidelines on stress testing. She also discussed the issue of share cancellation and highlighted that ESMA is liaising with EC on this issue since this practice raises issues of interpretation of the MMF Regulation. In light of the output of EC’s assessment, ESMA will decide what action should be taken. “I know that the industry is keen for clarity on this matter and we hope that it will be resolved soon,” added Ms. Ross. Speaking about costs and charges of investment funds, she mentioned that, with regard to the EC’s Capital Markets Union initiative, one goal is to increase the attractiveness of long-terms savings products for retail investors. To this end, EC has asked ESMA, along with the other ESAs, to issue recurring reports on the cost and past performance of the main categories of retail investment, insurance, and pension products. ESMA is working on analyzing this issue.
Ms. Ross also discussed two specific issues in the context of MiFID II—namely investment research and the Legal Entity Identifier (LEI). With regard to MiFID II, compliance with LEI rules is one of the key reforms. EU investment firms and trading venues are obliged to report the LEI of these entities regardless of where they are based and regardless of whether the entity is subject to LEI requirements in its own jurisdiction. As the compliance deadline for this is approaching fast, she emphasized that “we expect market participants to take all necessary steps to ensure full compliance with the LEI requirements under MiFID II.” On this issue, she concluded that “LEI issuance is growing dramatically as the MIFID II deadline approaches, with average daily volumes increasing each week. Indeed, the average daily volume of LEI issuances by week has doubled since the beginning of October. Let us hope that this positive momentum will continue.”
Related Link: Speech (PDF)
Keywords: Europe, EU, Securities, Brexit, LEI, MiFID II, MMF Regulation, Supervisory Convergence, ESMA
Previous Article
PRA Consults on Changes to the Large Exposures FrameworkRelated 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.