Other Regulatory Developments to Watch
OCTOBER 18, 2023

Sustainable Finance

On 31 July 2023, the European Commission (EC) adopted the final delegated act of the European Sustainability Reporting Standards (ESRS), applicable as from 1 January 2024. The Act includes the twelve ESRS, which are made up of two cross-cutting standards applying to all sustainability matters, and the remaining ten topical standards covering a wide range of environmental, social and governance (ESG) matters. The ESRS are the sustainability reporting standards that underpin the Corporate Sustainability Reporting Directive (CSRD) and include detailed and standardised disclosure requirements for companies to report on ESG matters.

Furthermore, on 14 September 2023, the EC issued a targeted consultation to seek feedback on the Sustainable Finance Disclosures Regulation (SFDR). The consultation process, which runs until 15 December 2023, is part of a comprehensive assessment of the framework to assess potential shortcomings; focusing on legal certainty, the useability of the regulation and its ability to play its part in tackling greenwashing. This consultation will gather input from public bodies and stakeholders that are familiar with the SFDR and the EU’s sustainable finance framework, and hence financial market participants are encouraged to submit their feedback.

On 18 July 2023, the EBA announced in its Decision that it will be collecting, on an ad-hoc basis, ESG data from large, listed institutions based on their Pillar 3 quantitative disclosures on ESG related risks. Such an exercise is intended to provide competent authorities with data to monitor ESG risks and support the EBA in fulfilling its ESG mandates, including the setting up of a risk monitoring framework and to contribute to the EC’s strategy for financing the transition to a sustainable economy. The first annual submission reference date is 31 December 2023, and competent authorities are then required to submit the institutions’ data to the EBA by 30 June 2024. The first semi-annual reference date is 30 June 2024 and data will have to be submitted to the EBA by 31 December 2024. This approach is an interim solution bridging the gap until the amendment to the Capital Requirements Regulation (CRR3) becomes applicable, as institutions will then be required to report information on their exposures to ESG risks as part of the supervisory reporting framework. In this regard, the ESG ad-hoc collection under this decision shall continue until such data becomes available under the ITS on supervisory reporting.

On 15 September 2023, the EBA also launched a qualitative questionnaire for a sample of credit institutions, including three local banks, to collect information on the costs and benefits of originating and monitoring green loans. The feedback provided will be used to inform and support the development of the EBA’s response to the EC’s call for advice on green loans and mortgages. The scope of the questionnaire is limited to green loans to households and SMEs covering three product categories; mortgages, loans to finance the purchase of movable property (e.g. cars), and other loans (e.g. financing the purchase of green home equipment and heating systems).

Markets in Crypto-Assets Regulation (MiCAR)

MiCAR entered into force on 29 June 2023, and is applicable from 30 December 2024 except for the provisions relating to asset-referenced tokens (ARTs) and electronic money tokens (EMTs) which are applicable as from 30 June 2024. The EBA is mandated to develop 17 technical standards and guidelines under MiCAR to further specify the requirements for ARTs and EMTs, and an additional 4 mandates jointly with ESMA and/or EIOPA. In this regard, credit institutions are also encouraged to participate in public consultations that are published from time to time on the EBA website.

On 12 July 2023, the EBA published a statement for the attention of financial institutions and other undertakings who intend to commence, or have commenced, ART or EMT activities prior to 30 June 2024, and for competent authorities. The statement is intended to encourage timely preparatory actions in relation to MiCAR, with the objective to reduce the risks of potentially disruptive and sharp business model adjustments at a later stage, to foster supervisory convergence, and to facilitate the protection of consumers.

The statement includes ‘guiding principles’ which financial institutions carrying out ART/EMT activities are encouraged to have regard until the application date.