ESMA Publishes Guidance on EURIBOR Fallbacks, Issues Other Updates
The European Securities and Markets Authority (ESMA) published an updated register of crowdfunding service providers, guidance on EURIBOR fallbacks for corporate lending products, and decided to postpone the amendment of the European Single Electronic Format (ESEF) regulatory technical standards to 2024. However, issuers will still be able to fulfil their regulatory obligations to mark up their 2023 IFRS consolidated financial statements as the 2022 ESEF Taxonomy is mandatory and applicable for financial years beginning on or after January 01, 2023. Additionally, ESMA will perform the preparatory work to start developing the ESEF sustainability reporting taxonomy and related reporting requirements based on the European Sustainability Reporting Standards Taxonomy. ESMA also published the consolidated questions and answers (Q&A) on the Sustainable Finance Disclosure Regulation (SFDR or Regulation 2019/2088) and the SFDR Delegated Regulation (2022/1288), which includes Q&A on the definition of sustainable investment, disclosures on principal adverse impacts, financial products, and taxonomy aligned investment disclosures.
The EURIBOR fallbacks guidance is intended for Implementing the recommendations on EURIBOR fallback trigger events and €STR-based EURIBOR fallback rates. This guidance is specific to corporate lending products and is addressed to all parties active in EURIBOR-referencing corporate lending products, including lenders, borrowers, investors, advisers, and legal firms. The working group previously published recommendations for EURIBOR fallback trigger events and €STR-based EURIBOR fallback rates in May 2021. While EURIBOR is not scheduled to be discontinued, this does not negate the need for market participants to include robust fallback language in their contracts. Robust fallbacks are a requirement of the EU Benchmarks Regulation and the working group has previously stressed the importance of including robust fallbacks in all financial contracts, not just those within the scope of the Benchmarks Regulation. The working group understands that these recommendations are not generally being adopted in corporate lending products for various reasons. The working group, however, reiterates the importance of the adoption of EURIBOR fallback rates and trigger events in new and refinanced euro denominated corporate lending products to avoid operational and market disruption risks. Thus, the working group decided at its December 2022 meeting to provide this further guidance on corporate lending products to foster the adoption of €STR-based EURIBOR fallbacks.
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Keywords: Europe, EU, Banking, Interest Rate Benchmarks, ESEF, Q&A, IFRS Taxonomy, Lending, SFDR, ESEF Regulation, Crowdfunding Service Providers, Benchmark Reforms, EURIBOR Fallbacks, ESMA
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