Global Trustee and Fiduciary Services Bite Sized Issue 7 2023

Global Trustee and Fiduciary Services Bite-Sized | Issue 7 | 2023 3 QUICK LINKS CRYPTOASSETS CYBER DORA ELIGIBLE ASSETS DIRECTIVE FINANCIAL STABILITY BOARD FINTECH LTAF MICA MIFID II/MIFIR NBFI SUSTAINABLE FINANCE/ ESG ASIA EUROPE LUXEMBOURG NORTH AMERICA UNITED KINGDOM ESMA is also invited to assess the risks and benefits of UCITS gaining exposures to asset classes that are not directly investable for UCITS, e.g., through delta-one instruments, (embedded) derivatives and financial indices. In relation to Efficient Portfolio Management, ESMA is also invited to advise on possible legislative clarifications to address the shortcomings identified in the context of its supervisory convergence work, notably the 2018 ESMA Peer Review on the Guidelines on ETFs and other UCITS issues and its follow-up work performed in this respect as well as the ESMA Common Supervisory Action (CSA) on costs and fees in 2021. To this end, ESMA is invited to conduct a data gathering exercise with national competent authorities, and, where needed, with market participants to gather insights on the manner and the extent to which UCITS have gained direct and indirect exposures to certain asset categories that may give rise to divergent interpretations and/or risk for retail investors. ESMA is requested to deliver its technical advice by 31 October 2024. Link to European Commission Letter here FINANCIAL STABILITY BOARD FSB Consults on a Toolkit for Enhancing Third-party Risk Management and Oversight On 22 June 2023 the Financial Stability Board (FSB) published a public consultation on a toolkit for financial authorities and financial institutions, as well as service providers, for their third-party risk management and oversight. The FSB states that the toolkit has been developed against a backdrop of digitalisation of the financial services sector and growing reliance of financial institutions on third-party service providers for a range of services, some of which support their critical operations. The FSB says dependencies can bring many benefits to financial institutions including flexibility, innovation and improved operational resilience. However, if not properly managed, the FSB says that disruption to critical services or service providers could pose risks to financial institutions and, in some cases, financial stability. The primary emphasis of the toolkit is on critical services given the potential impact of their disruption on financial institutions’ critical operations and financial stability. The FSB states that the toolkit takes a holistic view of third-party risk management, which is wider than the historical focus on outsourcing. The principle of proportionality is applicable throughout the toolkit, allowing the tools to be adapted to smaller, less complex institutions or to intra-group third-party service relationships. The FSB says that the toolkit aims to: • Reduce fragmentation in regulatory and supervisory approaches to financial institutions’ third- party risk management across jurisdictions and different areas of the financial services sector; • Strengthen financial institutions’ ability to manage third-party risks and financial authorities’ ability to monitor and strengthen the resilience of the financial system; and • Facilitate coordination among relevant stakeholders (i.e. financial authorities, financial institutions and third-party service providers). The deadline for responses is 22 August 2023. Link to Consultation here FINTECH MAS-led Industry ConsortiumReleases Toolkit for Responsible Use of AI in the Financial Sector On 26 June 2023 the Monetary Authority of Singapore (MAS) announced the release of an open- source toolkit to enable the responsible use of Artificial Intelligence (AI) in the financial industry.