Newsletter Financial Regulatory Compass – April

Newsletter Financial Regulatory Compass – April

April 2023

Newsletter Financial Regulatory Compass

This Newsletter on financial regulation covers the following topics:

In the world of financial regulation, keeping up to date with the numerous regulations that are being published is very complex. In order to serve as a guide, we are publishing a new edition of our newsletter in which we try to compile both European and Spanish regulations that we believe may be of interest to you.


The CNMV issues a communication on the operation of entities that provide investment services through tied agents 


On April 19th, the Spanish National Securities Market Commission (Comisión Nacional del Mercado de Valores) (“CNMV“) issued a communication setting out its conclusions regarding certain practices detected in the course of different supervisory actions involving entities rendering investment services through tied agents.

In particular, the CNMV highlights the following aspects:

  • Tied agents’ remuneration schemes: Having detected that the remuneration schemes for tied agents is fixed by purely quantitative criteria, entities are advised to adopt remuneration schemes compliant with the principle of neutrality, without favouring certain products over others of the same type, which do not include accelerators, and which significantly incorporate qualitative and not only quantitative criteria. In order to further specify acceptable remuneration practices, the CNMV has updated the answer to question 5.3 of its Q&A document on the application of the MiFID II Directive.
  • Training requirements: CNMV has identified cases where tied agents lack the required training to be able to provide financial information and advice without supervision, or where no ongoing training procedures have been established to ensure appropriate knowledge and experience in the provision of investment services, as well as cases where too many tied agents work under the supervision of a single person in charge. In this sense, CNMV reminds financial entities of the obligation to comply with the provisions of CNMV Technical Guide 4/2017 for the assessment of the knowledge and competences of staff giving information and advice.
  • Provision of investment advice services by tied agents: Entities must establish in greater detail the criteria and methodologies used by tied agents to provide investment advice services, implementing control systems that allow them to verify its alignment with the centralised instructions given by the financial entities. In addition, CNMV stresses that the tied agents cannot render investment advice in their own, independently from the financial entities.
  • Control procedures: It is important that entities implement adequate and sufficient control procedures over the agency network in order to avoid, for example, cases in which those individuals responsible of the agency network’s control functions are not independent of the business units they supervise; or cases where credit entities’ tied agents are not registered in Bank of Spain’s registry or do not provide services on an exclusive basis; or cases where tied agents do not expressly indicate their agent status in their relations with customers.
  • The role of the prescriber or introducing agent: Regarding the role of prescriber or introducing agent (who collaborates with the entity in exchange of a remuneration but is not registered as a tied agent), the CNMV reminds financial entities that both the marketing of investment services and activities, and the solicitation of clients fall under the scope of the activity reservation principle, and may be carried out exclusively by firms authorised to provide investment services or their tied agents, who must be duly registered as such, even when they act as mere introducing agents.

Finally, the CNMV points out that they will take into account the issues covered in this communication in their regulatory compliance review actions.

National Legislation 

Law 6/2023, of 17 March, on Securities Markets and Investment Services 

On April 7th, the new Law on Securities Markets and Investment Services (Ley 6/2023, de 17 de marzo, de los Mercados de Valores y de los Servicios de Inversión) entered into force except for: (i) Article 63, which will enter into force on September 18th; and (ii) Articles 307 and 323, which will do so when the Regulation (EU) of the European Parliament and of the Council on crypto-asset markets and amending Directive (EU) 2019/1937 enters into force.

Finally, until the regulations implementing this law are approved, the current rules on securities markets and investment services shall remain in force insofar as they do not conflict with the provisions therein.

You may consult in the following link the different legal notes issued by Pérez-Llorca which include the novelties introduced in different areas.


The CNMV approves the Technical Guide on reinforcing the transparency of certain fixed income CIS with buy-and-hold or specific performance objective strategies

In the last edition of our Newsletter, we echoed the public consultation on the proposed technical guide published for this purpose on February 13th. This proposal is now a reality, as on April 26th the CNMV approved the Technical Guide on the reinforcement of collective investment scheme’s (“CIS”) transparency with the specific performance objective and of fixed income CIS with a buy-and-hold strategy.

As we pointed out in our last review, the boom of this type of investment vehicles has led the CNMV to update the criteria included in the Technical Guide 1/2017 on enhancing transparency of investment funds with a specific long-term performance objective, applicable only to funds with a specific performance objective with a term of more than three years, in order to reflect best market practices and extend its application to investment funds with buy-and-hold strategies.

In summary, the most important new features of the Technical Guide are as follows:

  • It harmonises the criteria for the reporting to investors on the estimated return that may be expected on a CIS with a buy-and-hold strategy when holding the investment to maturity.
  • It includes a section aimed at informing investors of the effects of inflation on the nominal return of their investments. To this end, the prospectuses of these CIS shall include reference to the concept of real return, understood as the return on the product net of the inflation during the investment period.
  • It includes warnings for investors related to: (a) the cost of liquidity, obliging CIS with less than twelve liquidity windows per year to include a warning of the costs of the redemption outside said liquidity windows; and (b) maturity risk, widening the obligation to include this type of warning to fixed income CIS with a buy and hold strategy, and to those CIS whose strategy has a maturity exceeding two years.

CNMV updates its Q&A document on the implementation of MiFID II Directive 

On April 19th, the CNMV updated its Q&A document on the implementation of the MiFID II Directive. In particular, question 5.3 was updated with regard to the possibility for investment firms to establish a 100% variable remuneration scheme for tied agents.

The CNMV considers it acceptable for tied agents’ remuneration to be 100% variable, provided that any conflicts of interest that may arise from this situation are adequately managed. However, it points out that the remuneration scheme adopted must, in any case, comply with the principle of neutrality, so that it does not favour certain products over others of the same type, that it does not include accelerators, and that it incorporates qualitative and not only quantitative criteria that foster adherence to the rules of conduct.

Furthermore, the CNMV lists, for illustrative purposes, five examples of remuneration practices that would not be considered acceptable.

CNMV issues press release informing on the situation of the LIBOR Index 

On April 27th, the CNMV issued a press release reporting the situation of the LIBOR index. This statement is aimed at informing on the decisions adopted by the US and UK authorities regarding the end of the publication of the LIBOR USD index on 30 June. In this regard, information of interest is provided for those Spanish entities that still have contracts or instruments referenced to this index.

CNMV statement on the explanation of alternative performance measures used when publishing financial information 

On April 17th, the CNMV issued a statement addressed to listed companies reminding them of a series of guidelines regarding their obligation to provide sufficient information on the alternative performance measures used when producing and publishing their financial information.

Mainly, the CNMV highlights that such measures should follow the criteria set out by ESMA, should not be prominently displayed in relation to measures obtained directly from the financial statements, and issuers should be cautious when presenting alternative measures using ESG labels, avoiding creating an impression of compliance with the sustainability legal framework.

CNMV adopts Guidelines on the application for authorisation to operate a DLT-based market infrastructure 

On March 10th, the CNMV issued a statement informing of its intention to comply with the ESMA Guidelines on standard forms, formats and templates for the application for authorisation to operate a market infrastructure based on distributed ledger technology (“DLT“), which will now take into account in its supervisory work.

These Guidelines aim to establish consistent, effective and efficient practices within the European Union, ensuring a uniform application of the provisions of Regulation (EU) No 2022/858 of the European Parliament and of the Council of 30 May concerning the information required for the processing of applications for authorisation of DLT based multilateral trading facilities, settlement systems or trading and settlement systems.

Bank of Spain  

Circular 1/2023, of 24 de February, of the Bank of Spain on the information to be reported to Bank of Spain on covered bond and other loan mobilisation instruments  

On March 2nd, the Spanish Official Gazette published the Circular 1/2023 of 24 February of the Bank of Spain to credit entities, Spanish branches of EU credit entities and Spanish financial credit establishments, on the information to be reported to Bank of Spain on covered bonds and other loan instruments.

This text, in force since 31st March, seeks to establish the content, frequency and deadline for the transmission of the financial information that credit entities, Spanish branches of EU credit entities and Spanish financial credit establishments must send in relation to the following:

  • issuances of covered bonds, mortgage bonds, mortgage transfer certificates and instruments of credits or loans secured by first mortgage or non-possessory pledges;
  • the liquidity cushion requirements relating to the hedging for covered bond programs; and
  • the organisation and management of the special register and the supervisory body for the hedging package.

The first statements to be prepared in accordance with the rules of this Circular will be those corresponding to the first quarter of 2023, which shall be submitted to the Bank of Spain together with those corresponding to the second quarter.

Circular 2/2023, of 17 March, of the Bank of Spain amending Circular 1/2013, of 24 May, on the Risk Information Centre 

On March 25th, Circular 2/2023 of 17 March of the Bank of Spain was published in the Spanish Official Gazette, amending Circular 1/2013 of 24 May on the Risk Information Centre.

This Circular, which will enter into force on July 1st, seeks to adapt Circular 1/2013 to the changes introduced by Order ETD 600/2022 of 29 June. In particular, as from January 2nd, obliged entities will have to report to the Risk Information Centre, on an individual basis, all transactions of holders whose aggregated risk at the entity is equal to or greater than EUR 3,000.

Resolution of 7 March 2023, of the Executive Commission of the Bank of Spain amending the Resolution of 25 January 2008 approving the general terms and conditions applicable to the Interbank Deposit Settlement Services 

On March 13th, the Resolution of 7 March 2023 of the Executive Commission of the Bank of Spain amending the Resolution of 25 January 2008 approving the general clauses applicable to the Interbank Deposit Settlement Service (the “Resolution“) was published in the Spanish Official Gazette.

Last March 20th marked the start date of TARGET-Bank of Spain, the Spanish payment system that is part of the new generation Trans-European Automated Real-Time Gross Settlement Express Transfer system for real-time gross settlement (TARGET) operated by the Bank of Spain. Since then, this system has replaced the previously existing TARGET2-Bank of Spain system.

The TARGET-Bank of Spain system offers the same functionalities as the previous one, although it has the following main new features:

  • the settlement of transactions is no longer carried out on payment module accounts but on new cash accounts for real-time gross settlement of large-value payments; and
  • the concepts of direct participant and indirect participant in TARGET2 disappear, which entails the replacement of the general terms and conditions of the Interbank Deposit Settlement Service, approved in 2008, by the terms and conditions set out in the Annex to the Resolution.

Bank of Spain launches prior public consultation on draft supervisory guidance on revolving credit transparency 

On April 25th, Bank of Spain launched a public consultation on the draft Supervisory Guidelines of Bank of Spain on the transparency of revolving credit for entities subject to Bank of Spain’s supervision, in order to gather the views of interested parties on said draft.

The purpose of the draft Supervisory Guidelines is to inform supervised entities of the criteria and procedures that Bank of Spain intends to apply in order to assess compliance with the rules applicable to the granting of revolving credit.

The deadline to partake in the public consultation is May 31st.

Bank of Spain publishes its Annual Supervisory Report 

On March 28th, Bank of Spain published its Annual Supervisory Report for 2022 which summarises the functions and organisation of the Bank of Spain’s supervisory activities and reports on the main actions carried out during 2022.

This report reviews the Bank of Spain’s activity, mainly in the areas of: (i) microprudential supervision of credit entities included in the Single Supervisory Mechanism (SSM); (ii) macroprudential policy and its application during 2022; (iii) supervision of the conduct of supervised entities; (iv) surveillance and supervision of market infrastructures; and (vi) the exercise of sanctioning powers by Bank of Spain.

European Union

The European Parliament gives its final approval to the Regulation on crypto-assests (MiCA)

On 20th April, the plenary of the European Parliament adopted the final text of the Regulation on crypto-asset markets and amending Regulations (EU) No 1093/2010 and (EU) No 1095/2010 and Directives 2013/36/EU and (EU) 2019/1937 (“MiCA“), with 517 votes in favour, 38 against and 18 abstentions.

With this piece of legislation, the European Union takes the lead in crypto-asset regulation globally by creating a specific and harmonised legal framework specific to crypto-assets, fostering innovation and fair competition, and ensuring a high level of protection for retail holders and market integrity in crypto-asset markets.

As a major novelty, MiCa sets forth the following definition of crypto-assets: “a digital representation of a value or a right which may be transferred and stored electronically, using distributed ledger technology or similar technology”.

In furtherance, Article 2 states that MiCA will apply to individuals and legal persons, as well as to companies that issue crypto-assets or provide crypto-related services in EU territory. However, it shall not apply to the following subjects: (i) persons providing crypto-asset services exclusively for their parent companies, for their subsidiaries or for other subsidiaries of their parent companies; (ii) the liquidator or an administrator acting in the course of insolvency proceedings (except in relation to Article 42 of MiCA); (iii) the European Central Bank, the national central banks of the Member States when acting in their capacity as monetary authority or other public authorities of the Member States; (iv) the European Investment Bank including its subsidiaries; (v) the European Financial Stability Facility and the European Stability Mechanism; (vi) public international organisations; and (vii) insurance undertakings and companies engaging on the business of reinsurance and retrocession, as defined in Directive 2009/138/EC of the European Parliament and of the Council, when carrying out the activities referred to in said Directive.

The agreed text must also be approved by the Council (which is expected to happen in May) and will enter into force 20 days after its publication in the Official Journal of the European Union. In terms of implementation, MiCA will be applicable 18 months after its entry into force, with the exception of the issuance schemes for e-money tokens and asset-referenced tokens, which will be applicable 12 months after such date.

European Commission publishes Commission Delegated Regulation (EU) 2023/827, of 11 October 2022, as regards the prior permission to reduce own funds and requirements for eligible liability instruments 

On April 19th, the European Commission published Commission Delegated Regulation (EU) 2023/827 of 11 October 2022 laying down regulatory technical standards amending Delegated Regulation (EU) No 241/2014 as regards the prior permission to reduce own funds and requirements related to eligible liability instruments.

The purpose of the delegated regulation is to harmonise the procedures for the obtention of ex ante authorisation by supervisory and resolution authorities for the reduction of own funds (Article 78 of Regulation (EU) No. 575/2013) as well as for the reduction of eligible liability instruments (Article 78a of Regulation (EU) No. 575/2013). Both ex ante authorisation procedures aim to ensure compliance with regulatory requirements relating to own funds and eligible liabilities.

Most notably, a simplified application regime has been introduced to allow financial entities whose MREL does not exceed the own funds requirements to reduce their eligible liabilities in a more streamlined manner. In addition, resolution authorities will be able to grant such authorisation in the form of a tacit agreement.

Regulation (UE) 2023/606  of the European Parliament and of the Council, of 15 March 2023, on investment policy requirements and operating conditions for European long-term investment funds

Last March 20th, Regulation (EU) 2023/606 of the European Parliament and of the Council of 15 March 2023 amending Regulation (EU) 2015/760 as regards investment policy requirements and operating conditions for European long-term investment funds and the scope of eligible assets, portfolio composition and diversification requirements and cash lending and other fund rules, was published in the Official Journal of the European Union.

This regulation seeks to make the European long-term funds’ (“ELTIF“) regime more flexible in order to foster their use as an alternative for channeling savings into long-term investments in the European Union.

The most relevant new features introduced by this Regulation with regard to the ELTIF regime are highlighted below:

  • The list of eligible assets is widened to include, inter alia, UCITs and AIFs, securitisations deemed simple, transparent and standardised, green bonds issued by an eligible portfolio company (under certain conditions).
  • The minimum percentage of investment in eligible assets is reduced from 70% to 55%, allowing increased investment in other assets.
  • The creation of ELTIFs with master-feeder structures is allowed, provided that the feeder invests at least 85% of its assets in units or shares of another ELTIF or in an investment compartment thereof.
  • It simplifies the requirements for companies to be portfolio-eligible.
  • ELTIFs management companies may allow early withdrawals by investors.
  • The minimum initial investment and minimum investment percentage requirements for clients with portfolios worth less than EUR 500,000 are deleted.

The Regulation entered into force 20 days after its publication and will apply from 10 January 2024.

CRR Delegated Regulation on risk-weighted exposure amounts of collective investment undertakings is published

On March 9th, the Official Journal of the European Union published the Delegated Regulation (EU) 2023/511 of 24 November 2022 supplementing Regulation (EU) No 575/2013 of the European Parliament and of the Council (“CRR“) as regards regulatory technical standards for the calculation of risk-weighted exposure amounts of collective investment schemes under the mandate-based approach (Article 132bis (2) CRR).

Commission Delegated Regulation (EU) 2023/662, of 20 January 2023, regarding the methodology for calculating derivative liabilities

On March 22nd, Commission Delegated Regulation (EU) 2023/662 of 20 January 2023 amending Delegated Regulation (EU) 2015/63 as regards the methodology for calculating derivative liabilities (“Regulation“) was published in the Official Journal of the European Union.

Regulation (EU) 2019/876 introduced in the Capital Requirements Regulation (“CRR“) the obligation for entities to calculate the exposure value of derivative contracts in accordance with the valuation method known as the Standardised Approach – Counterparty Credit Risk (“SA-CCR“), which replaced the Current Exposure Method or “CEM“. However, it is not possible to apply the SA-CCR method for the valuation of liabilities resulting from derivative contracts. The Regulation, therefore, amends Delegated Regulation (EU) 2015/63 to allow entities to use the CEM for the valuation of liabilities arising from derivative contracts.

Commission Delegated Regulation (EU) 2023/450, of 25 November 2022, on a framework for the recovery and resolution of central counterparties

On March 3rd, Commission Delegated Regulation (EU) 2023/450 of 25 November 2022 supplementing Regulation (EU) 2021/23 of the European Parliament and of the Council of 16 December 2020 on a legal framework for the recovery and resolution of central counterparties (“CCPs“) was published in the Official Journal of the European Union.

In particular, this Delegated Regulation aims at specifying the order in which CCPs must pay compensation to non-defaulting clearing members as referred to in Article 20(1) of Regulation (EU) 2021/23; the maximum number of years during which CCPs must allocate a portion of their annual profits to payments to instrument holders that recognise a claim on their future profits; and the maximum proportion of profits to be used to carry out such payments.

The Delegated Regulation entered into force on 23 March, 20 days after its publication.

European Commission proposes reform of the bank crisis management and deposit insurance framework

On April 18th, the European Commission adopted a proposal to reform the existing legislative framework for bank crisis management and deposit insurance for small and medium-sized credit entities, with the ultimate aim of strengthening consumers’ protection.

The European Commission points out that on certain occasions the insolvency situations of small and medium-sized credit entities have been addressed with solutions outside the regulatory framework for the resolution of credit entities. As a consequence, in some cases it has been necessary to resort to public funds since the bank’s internal resources and the rest of recapitalisation instruments provided for in the legislation (deposit guarantee schemes and resolution funds) were not sufficient.

In this context, the Commission has prepared a proposal for a legislative package which aims to make it easier for authorities to manage insolvency situations in credit entities of all sizes and business models by widening the range of available instruments. However, the Commission recalls that the use of such instruments must be preceded by the use of the entities’ own internal recapitalisation schemes.

This proposal will now be discussed in the European Parliament and Council.

Council of the European Union agrees a negotiating position on distance contracts in financial services

On March 2nd, the Council of the European Union issued a press release informing of the agreement of a negotiating position on the proposal for a Directive of the European Parliament and of the Council amending Directive 2011/83/EU on distance contracts in financial services and repealing Directive 2002/65/EC (the “Directive”). This position shall be adopted by the President of the Council in his negotiations with the European Parliament.

Although the Council’s approach is consistent with the general objectives of the Commission’s proposal, it introduces several nuances that seek to increase its coherence with respect to the sectorial legislation in force. Namely, we should highlight the following:


  • It proposes a minimum harmonisation of pre-contractual obligations, allowing Member States to have stricter national rules than those set forth by the Directive, in order to avoid the risk of weaker consumer protection in certain countries.
  • It specifies the scope and safety-net nature of the Directive, in particular for financial services excluded from or only partially covered by other sectorial legislations.
  • It introduces other provisions of consumer rights legislation, applying them to financial services contracts concluded at a distance (e.g., provisions on telephone contracts, inertia selling or the possibility for Member States to introduce language requirements in national legislation on pre-contractual information).
  • With regard to the right of withdrawal, the Council proposes that its effects should apply to all contracts concluded at a distance and not only to those related to financial services.

MEPs voted in favour of amending MiFIR and MiFID II to promote Capital Markets Union

The European Parliament has announced, by means of a press release issued on March 1st, the approval of the proposals to amend MiFID II and MiFIR, published in November 2021, which include a series of changes to the original texts aimed at (i) facilitating access to market information; (ii) increasing market transparency; (iii) fostering the international competitiveness of EU markets; and (iv) standardising requirements and conditions in the different trading venues in the EU. All this in order to promote the European project of the Capital Markets Union.


ECB publishes a report on the digital euro and a study on possible features of a digital wallet

On April 24th, the ECB published its third progress report on the digital euro, as well as a document that collects and analyses the views of various samples of the population in different Member States on the features that a digital wallet should have.

The report presents a third set of design and distribution alternatives, endorsed by the ECB’s Governing Council, which would contribute to the design of a digital euro.

ECB publishes annual report on its supervisory activities

Last March 21st, the ECB published its annual report on its supervisory activities, which has been submitted to the European Parliament, the Council, the Commission and the Eurogroup. The report provides an overview of the activities carried out by the ECB in the context of the supervisory tasks assigned to it by the Single Supervisory Mechanism (SSM) Regulation.

Among other issues, the report reviews the ECB’s activity in relation to: (i) the execution of supervisory tasks and the budget allocated to them; (ii) the division of tasks with national supervisory authorities; (iii) cooperation with other competent national or Union authorities; (iv) the implementation of the Code of Conduct; (v) authorisation, sanctioning and enforcement procedures; and (vi) experience regarding reporting infringements.

Statement by ECB Banking Supervision, SRB and EBA on the announcement by the Swiss authorities on 19 March 2023

On March 20th, ECB Banking Supervision, the Single Resolution Board (“SRB“) and the EBA welcomed the comprehensive set of measures adopted on March 19th by the Swiss authorities to ensure the stability of the financial sector. To this end, they stressed that the European banking sector is resilient, with sound capital and liquidity levels.

In addition, they emphasised that the resolution framework implemented in the European Union, based on the reforms recommended by the Financial Stability Board following the 2008 financial crisis, has established, among other things, the order in which shareholders and creditors of a distressed bank should bear losses. Specifically, common equity instruments are the first to absorb losses and only after full utilisation would additional Tier 1 capital be required to be written down. This approach has been consistently applied in past cases and will continue to guide the actions of the SRB and ECB Banking Supervision in their interventions in crisis situations.

Coordinated central bank action to enhance US dollar liquidity

On March 19th, the Bank of Canada, the Bank of England, the Bank of Japan, the European Central Bank, the Federal Reserve and the Swiss National Bank announced a coordinated action to enhance US dollar liquidity through the establishment of standing US dollar liquidity swap line arrangements. The move came on the heels of news of the Swiss authorities’ negotiated agreement for UBS to acquire Credit Suisse in order to prevent its collapse.

The network of swap lines among these central banks provides important liquidity support to ease strains in global funding markets, thereby helping to mitigate the effects of such tensions on the supply of credit to households and businesses. In this regard, the central banks that currently offer US dollar operations have agreed to increase the frequency of operations with a maturity of seven days from weekly to daily. These daily operations started on March 20th and have been extended until the end of April.


ESMA publishes Guidelines on fractional shares

ESMA issued a statement, on March 28th, outlining investor protection concerns about derivatives on fractional shares.

In this communication, ESMA stresses that derivatives on fractional shares do not constitute corporate shares and therefore investment firms should not use the term “fractional shares” to refer to these instruments.

In addition, firms must ensure that they: (i) comply with requirements on the disclosure of the products’ nature and risks to clients, including express reference to their status as financial derivative instruments; (ii) target these instruments to a particular type of client, in accordance with their complex nature; and (iii) carry out suitability assessments in cases when providing services that do not involve investment advice.

instrumentos financieros derivados; (ii) dirigir estos instrumentos a un tipo determinado de clientes, de acuerdo con su naturaleza compleja; y (iii) llevar a cabo las evaluaciones de conveniencia en los casos en que se presten servicios que no conlleven asesoramiento en materia de inversión.

ESMA updates its Guidelines on Product Governance

ESMA issued the Final Report on MiFID II Product Governance Guidelines on March 27th. Prior to this, ESMA conducted a public consultation to gather stakeholder views. Broadly speaking, the amendments to the Guidelines relate to:

  • the specification of any sustainability-related objectives with which a product is compatible;
  • the identification of target markets by product group rather than individually;
  • the determination of a compatible distribution strategy in cases where a distributor considers that a complex product may be distributed without advice; and
  • the regular review of products, including the application of the principle of proportionality.

Furthermore, Annex VI of the Final Report includes a list of best practices in relation to compliance with MiFID II requirements on product governance and Annex VII includes examples of implementation of certain aspects of these Guidelines.

ESMA updates various Q&A documents on the benchmark Regulation, EMIR and the DLT Pilot Regime

On March 31st, ESMA published updates to the following question and answer documents (“Q&A“):

  • In relation to the Q&A on Regulation (EU) 2016/1011 of the European Parliament and of the Council, of 8 June 2016, on indices used as benchmarks in financial instruments and financial contracts or to measure the performance of investment funds, ESMA amends the wording of paragraph 7.6 to specify which entities would be suitable candidates to be legal representatives in line with Article 32(3) of said Regulation.
  • In relation to the Q&A on the implementation of Regulation (EU) No 648/2012 of the European Parliament and of the Council, of 4 July 2012, on OTC derivatives, central counterparties and trade repositories (EMIRs), ESMA determines which counterparties are required to report to national competent authorities on the conclusion of exchange-traded contracts (ETDs).

This obligation shall apply to: (i) the central counterparty (“CCP”) clearing the derivative; (ii) members of the CCP in charge of clearing the derivative; (iii) investment firms involved in the transaction chain that assume risk for the derivative; and (iv) other counterparties that do not fall into the above categories but assume risk for the derivative unless they are exempted.

  • In relation to the Q&A on Regulation (EU) 2022/858 of the European Parliament and of the Council, of 30 May 2022, on a pilot scheme for market infrastructures based on decentralised registration technology, ESMA specifies how the provisional market capitalisation of shares represented by decentralised registration technology (DLT) systems should be calculated.

ESMA updates Q&A on the AIFMD Directive

On March 30th, ESMA updated its Q&A document on the implementation of Directive 2011/61/EU of the European Parliament and of the Council, of 8 June 2011, on Alternative Investment Fund Managers (“AIFMD“). Specifically, ESMA includes a new section aimed at clarifying that the concept of direct or substantial indirect holding referred to in Article 3.2 of the AIFMD:

  • applies to alternative investment fund (“AIF“) managers that manage AIFs portfolios through their direct or indirect participation in a company. This covers, for instance, situations where the manager has de facto power to impose decisions on, inter alia, the composition of the AIF’s portfolio, its asset allocation or its risk management; and
  • its application should be considered by the competent authorities on a case-by-case basis as AIFMD does not set a quantitative threshold.

ESMA publishes guidance on the supervision of copy trading services

ESMA issued, on March 30th, a supervisory handbook on firms offering copy trading services in order to promote investor protection and to pursue supervisory convergence across the Union.

This report includes guidance on the qualification of copy trading services as investment services and sets out supervisory expectations with respect to MiFID II requirements on: (i) disclosure requirements; (ii) product governance; (iii) suitability assessment; (iv) remuneration and incentives; and (v) qualifications of traders whose trades are being copied.


EBA issues public consultation on guidelines for assessing the knowledge and experience of the management or administrative body of credit servicers

The EBA issued, on April 19th, a public consultation on its draft Guidelines on the assessment of the knowledge and experience of the management or administrative body of credit servicers in accordance with Directive (EU) 2021/2167 of the European Parliament and of the Council of 24 November 2021 on credit servicers and credit purchasers.

The Guidelines seek to specify the criteria for the assessment of the collective knowledge and experience of management bodies, which should be carried out on the basis of the individual assessment of their members by the credit servicers themselves taking into consideration the principle of proportionality.

The deadline to participate in the public consultation is July 17th.

EBA consults on amending the Guidelines on risk-based AML/CFT supervision to include of crypto-asset services providers

The EBA issued, on March 29th, a public consultation on the inclusion of crypto-asset service providers in the scope of application of its Guidelines on the risk-based supervision of the prevention of money laundering and terrorist financing (“AML/CFT“).

The amendments include clarifications on the sources of information that competent authorities should take into consideration when assessing the money laundering and terrorist financing risks associated with crypto-asset services providers. The EBA also highlighted the importance of a consistent approach to setting supervisory expectations where multiple competent authorities are responsible for the supervision of the same institutions.

EBA publishes a report on the annual assessment of bank’s internal approaches for the calculation of capital requirements

On March 10th, the EBA published a report setting out the results of the annual market and credit risk assessment exercises for the European banking sector for the 2022 financial year. The purpose of these exercises is to monitor the consistency of risk weighted assets (“RWAs”) across all European Union entities authorised to use internal approaches for the calculation of capital requirements.

With regard to market risk, the results generally confirm a relatively low dispersion in the initial market valuations of most instruments, as well as a decrease in the dispersion of value at risk compared with the previous year. On the other hand, with regard to credit risk, the variability of RWAs remained rather stable, despite the pandemic and the varying paces of banks in adopting and complying with the policies set out in the EBA’s internal rating-based roadmap.

EBA publishes Quarterly Risk Dashboard

On April 4th, the EBA published its Quarterly Risk Dashboard together with the first edition of the risk dashboard on minimum requirements for own funds and eligible liabilities (MREL). In both reports, the agency states that the events related to Silicon Valley Bank and Credit Suisse have had a significant impact on the capital and debt volatility of banks in the European Union and the European Economic Area, despite their limited exposure to these institutions.

Nevertheless, the results show that credit entities’ solvency and liquidity ratios remain strong and profitability continues to grow.


Commission urges Spain to transpose the Sustainability Factors Directive into national law

On April 19th, the European Commission sent a reasoned opinion to Spain urging it to transpose into national law the Commission Delegated Directive (EU) 2021/1269 of 21 April 2021 amending Delegated Directive (EU) 2017/593 as regards the integration of sustainability factors into the product governance obligations.

This Delegated Directive is part of the “Financing Sustainable Growth” Action Plan and its main objective is to provide a legal framework for sustainability factors and sustainability-related objectives to be taken into consideration in relation to the product governance and supervisory process of investment firms producing financial instruments and their distributors.

This opinion stipulates a deadline of two months for Spain to transpose the Directive.

European Commission clarifies reporting rules on sustainable investments

The European Commission has published answers to the questions raised by the ESAs on Regulation (EU) 2019/2088 of the European Parliament and of the Council of 27 November 2019 on sustainability-related disclosures in the financial services sector (“SFDR“), supplementing the Q&A document published on the matter.

The aim of these Q&A is to (i) facilitate financial market participants’ understanding of the application of SFDR, especially with regards to the requirements of the regulatory technical standards in force from January 2023; and (ii) contribute to the understanding of the interaction between SFDR and the different pieces of the sustainable finance legislative framework.

European Commission publishes proposal for Green Claims Directive

On March 22nd, the European Commission issued a proposal for a Directive known as the Green Claims Directive. The aim of this is to complete the European regulatory framework for consumer protection, establishing rules to deal with false environmental claims that companies may make in their relations with consumers (greenwashing). To this end, a set of rules is established, applicable to entities operating in the European Union, which standardise both the regulation and the methodology for verifying their sustainability declarations.

Among others, the proposal foresees: (i) rules for substantiating and communicating environmental claims in relation to products or companies; and (ii) new rules for the approval of ecolabels. However, as currently drafted, the Directive will not apply to sustainability information provided under European or local regulation, including investment fund regulations.

Furthermore, the proposed Directive foresees that Member States should designate competent authorities and provide them with the necessary powers and resources to ensure compliance.

The proposed Directive is now subject to approval by the European Parliament and the Council, after which it will have to be transposed into national law.

ESAs propose amendments to expand and simplify sustainability disclosure requirements

Last April 12th, the ESAs published a Consultation Paper proposing amendments to Commission Delegated Regulation (EU) 2022/1288 of 6 April 2022 (“RTS“) regarding the content and presentation of information pursuant to Articles 2a.3, 4.6 and 7, 8.3 and 4, 9.5 and 6, 10.2, and 11.4 and 5, of Regulation (EU) 2019/2088 of 27 November 2019 on sustainability disclosures in the financial services sector (“SFDR“).

In this sense, the ESAs have proposed changes to the sustainability disclosure framework in order to address certain challenges identified since the introduction of SFDR. Said Consultation Paper focuses on the following points:

  • Expands the list of universal social indicators for the disclosure of major adverse effects of investment decisions on the environment and society, such as profits from non-cooperative tax jurisdictions or interference with union formation.
  • Refine the content of other adverse impact indicators and their respective definitions, applicable methodologies, calculation formulas, as well as the presentation of the portion of information derived directly from investee, sovereign, supranational or real estate assets.
  • Add information on the decarbonisation targets for products, including intermediate targets, the level of ambition and how they will be achieved.

The Consultation Paper will remain open until July 4th.

European Commission public consultation on new criteria defining sustainable activities

On April 11th, the European Commission launched a public consultation to seek views on a new set of EU Taxonomy criteria for economic activities that contribute substantially to one or more of the following environmental objectives: (i) sustainable use and protection of water and marine resources; (ii) transition to a circular economy; (iii) prevention and control of pollution and protection; and (iv) restoration of biodiversity and ecosystems.

In addition, the Commission is consulting on proposed amendments to Commission Delegated Regulation (EU) 2021/2139 of 4 June 2021 covering the environmental objectives of climate change mitigation and adaptation, and on Commission Delegated Regulation (EU) 2021/2178 of 6 July 2021 on disclosure of information related to taxonomy. The criteria are based on the March and November 2022 recommendations of the Sustainable Finance Platform.

Draft Royal Decree regulating the content of reports on the estimation of the financial impact of risks associated with climate change for financial institutions, listed companies and other large companies is published

On April 14th, the Ministry of Economic Affairs and Digital Transformation published the Draft Royal Decree regulating the content of the reports on the estimation of the financial impact arising from the risks associated with climate change for listed companies, credit entities, insurance undertakings and other large companies. This aims to set out a regulatory framework for the production and publication of information on the financial impact of the risks associated with climate change by the companies that fall within its scope of application.

This Draft will be available for public hearing and information until May 5th, although the annual reports, including those published in 2023, must already comply with the requirements of the aforementioned Article 32.5 of Law 7/2021, of 20 May, on climate change and energy transition.

ECB reports on the climate impact of its portfolios towards alignment with the Paris Agreement

On March 23rd, the ECB published its first financial report related to environmental impact, which provide information on the carbon footprint of its portfolios and its exposure to climate risks, as well as on the governance, strategy and management of these risks.

The data, which are collected in two separate reports, cover the Euro system’s corporate securities holdings under the corporate sector purchase programme (“CSPP“) and the pandemic emergency purchase programme (“PEPP“), as well as the ECB’s euro-denominated non-monetary policy portfolios, also including its own funds portfolio and the ECB staff pension fund.

Published information shows that corporate bonds held under the CSPP and PEPP are in the process of decarbonisation. While the absolute greenhouse gas emissions of portfolios have increased in recent years due to the Eurosystem’s purchase of securities for monetary policy purposes, the carbon intensity of issuers has gradually decreased.

ECB and ESAs issue joint statement on disclosure of environmental information on structured finance products



On March 13th, the ECB and the ESAs published a joint statement aimed at promoting the development of disclosure standards for securitised assets that provide for harmonised requirements for environment-related data.

The release highlights that the lack of data on the assets underlying structured financial products hinders the classification of structured financial products under Regulation (EU) 2020/852 of the European Parliament and of the Council of 18 June 2020 on establishing a framework to facilitate sustainable investments (Taxonomy Regulation) and amending Regulation (EU) 2019/2088 of the European Parliament and of the Council of 27 November 2019 on sustainability-related disclosures in the financial services sector (SFDR), posing a detriment to the assessment and management of climate risks.

To this end, the ECB is working to strengthen the disclosure rules for securitised assets by including new climate change specific disclosure requirements.

Response from the Securities and Markets Stakeholder Group on greenwashing

The Securities and Markets Stakeholder Group has submitted a paper in response to questions raised by ESMA in its call for evidence on greenwashing, published by the ESAs last November. Such paper provides additional advice on the definition of greenwashing itself, the phenomenon of greenbleaching, and the fact that the number of funds subject to article 9 of SFDR is decreasing.

ESAs’ assessment of financial system resilience in the context of the green transition

On March 9th, the European Commission sent a letter to the European Supervisory Authorities (ESAs) requiring them to assess, in collaboration with the ECB and the European Systemic Risk Board, the resilience of the financial system in relation to climate risks and the financing of the transition to meet the target of reducing greenhouse gases by at least 55% below 1990 levels by 2030.