Global Trustee and Fiduciary Services Bite-Sized Issue 3 2025

3 QUICK LINKS CRYPTOASSETS CSDR EMIR FINTECH FSB OPERATIONAL RESILIENCE SUSTAINABLE FINANCE/ESG T+1 ASIA PACIFIC EUROPE IRELAND LUXEMBOURG NORTH AMERICA UNITED KINGDOM Global Trustee and Fiduciary Services Bite-Sized | Issue 3 | 2025 EMIR ESMA Consults on CCP Authorisations, Extensions and Validations On 7 February 2025, the European Securities and Markets Authority (ESMA) launched two consultations following the review of the European Market Infrastructure Regulation (EMIR 3). ESMA is encouraging stakeholders to share their views on: 1. The conditions for extensions of authorisation and the list of required documents and information for applications by central counterparties (CCPs) for initial authorisations and extensions, and 2. The conditions for validations of changes to CCP’s models and parameters and the list of required documents and information for applications for validations of such changes. EMIR 3 introduces several measures to make EU clearing services and EU CCPs more efficient and competitive, notably by streamlining and shortening supervisory procedures for initial authorisations, extensions of authorisation and validations of changes to models and parameters. The consultation period closes on 7 April 2025. Based on the responses received, ESMA will prepare the final report and intends to submit the final draft technical standards to the European Commission by 25 December 2025. Link to Consultation on the Extensions of Authorisation Conditions and List of Documents Under EMIR here Link to Consultation on the Validations of Changes to Models and Parameters Conditions and List of Documents Under EMIR here FINTECH AI in EU Investment Funds: Adoption, Strategies and Portfolio Exposures On 25 February 2025, the European Securities and Markets Authority (ESMA) published a TRV Risk Analysis (TRV) on EU investment funds’ use of artificial intelligence (AI). ESMA says the TRV evaluates the impact of AI and its recent advancements in the EU investment management industry. First, it studies the operational use of AI by fund managers, i.e. the extent to which the adoption of AI tools by asset managers plays a role in the investment process. Investment funds that promote their use of AI still represent a minor share of the industry, with their number having peaked in 2023. These funds typically aim to integrate AI into systematic investment strategies but have not delivered significantly higher or lower performance and have had mixed success among investors, experiencing outflows in recent periods. Instead, asset managers use generative AI and tools based on large language models primarily to support human-driven investment decisions. Second, the TRV assesses investment in AI, i.e. the portfolio allocation to AI-related companies by EU investment funds. ESMA says that, since 2023, actively managed equity funds increased the share of their portfolio invested in a set of AI-driven companies by over 50% – from 9 to 14 percentage points – with the market value of these positions doubling. ESMA says that while this is in line with the outsized growth of these companies’ market capitalisation throughout the AI-focused market rally, this increased exposure might shift the risk profile of some funds and amplify market risks. Correlated adverse conditions due to the uncertain outcomes associated with a fast-evolving technology – be it shifts in expectations, operational setbacks, or regulatory challenges – could explains the TRV report, significantly affect fund portfolio valuations. Link to TRV here