Global Trustee and Fiduciary Services Bite Sized Issue 12 2024

8 QUICK LINKS COSTS & CHARGES CSDR CRYPTOASSETS EMIR FINTECH FSB FUND LIQUIDITY MIFID II/MIFIR NBFI OPERATIONAL RESILIENCE SUSTAINABLEFINANCE/ESG T+1 ASIA NORTH AMERICA UNITED KINGDOM Global Trustee and Fiduciary Services Bite-Sized | Issue 12 | 2024 NBFI ESMA Responds to the EC Consultation on Non-Bank Financial Intermediation On 22 November 2024, the European Securities and Markets Authority (ESMA) published its response to the European Commission (EC) consultation on assessing the adequacy of macroprudential policies for Non-Bank Financial Intermediation (NBFI). In its response to the consultation, ESMA makes key proposals in several areas, as follows: Liquidity Management ESMA recognises the progress made with the revised UCITS and the AIFM Directives. This is especially the case with the provisions on liquidity management tools. ESMA, however, still considers that there is a need to address some remaining issues concerning liquidity mismatches in open-ended funds (OEFs). Competent authorities could require funds that invest in assets that are not liquid to be structured as closed-ended funds. ESMA says it fully supports the Recommendation of the Financial Stability Board related to the classification of OEFs based on asset liquidity and calls for appropriate efforts to ensure the convergent and consistent application of these recommendations in the EU. Money Market Fund Regulation (MMF) Review ESMA reiterates its position on the necessity to complete the reform of the MMF Regulation, considering the vulnerabilities identified in its Opinion. Supervision and Data ESMA proposes to progress towards data driven supervision, first by harmonising the framework to analyse risks posed by investment funds (especially regarding liquidity risks), and second by developing an EU system-wide stress test across NBFI and the banking sector. These proposals imply having comprehensive and good quality data to assess financial stability risks. ESMA says supervisors also need enhanced data sharing, ensuring that ESMA and other authorities have all required information and avoiding unnecessary burden on reporting market participants. Coordination ESMA suggests enhancing coordination between competent authorities by the creation of a formal reciprocation mechanism for leverage limits under the AIFMD. This mechanism would make national measures more effective by guarding against the potential for regulatory fragmentation or arbitrage across the EU. In addition, ESMA calls for the EC to consider granting ESMA the formal power to request the implementation of stricter macroprudential requirements by one or multiple national competent authorities, to address risks at EU-level. Link to the ESMA Response here OPERATIONAL RESILIENCE ESAs Announce Timeline to Collect Information for the Designation of Critical ICT Third-party Service Providers Under the DORA On 15 November 2024, the European Supervisory Authorities (EBA, EIOPA and ESMA – the ESAs) published a Decision on the information that competent authorities must report to them for the designation of critical ICT third-party service providers under the Digital Operational Resilience Act (DORA). In particular, the ESAs Decision requires competent authorities to report by 30 April 2025 the registers of information on contractual arrangements of the financial entities with ICT third-party service providers. Following the entry into force of DORA on 17 January 2025, the ESAs, together with competent authorities, will start the oversight of critical ICT third-party service providers (CTPPs) offering services to financial entities in the EU. The first oversight activity is the designation of CTPPs.