At the end of each month, the SAFE Regulatory Radar highlights a selection of important news and developments on financial regulation at the national and EU level.
ECMS: Harmonized rules on the mobilization and management of collateral in credit operations within the Eurosystem
On 14 August 2024, the European Central Bank (ECB) has published a harmonized set of rules on the mobilization and management of collateral in credit operations within the Eurosystem.
The current system for the mobilization and management of collateral relies on the individual management systems of national central banks of the Eurozone (NCBs), which means that the related procedures and practices currently differ across the various Eurozone jurisdictions and NCBs. This exposes counterparties to a wide variety of systems when providing collateral to the Eurosystem.
In this framework, the new set of harmonized rules contributes to the launch of the Eurosystem Collateral Management System (ECMS), a unified system for managing assets mobilized as collateral in Eurosystem credit operations, which takes the form of a single platform enabling NBCs to manage eligible assets and cash mobilized as collateral by their counterparties. The ECMS aims to improve the operational efficiency and transparency of collateral mobilization and management procedures and to mark a step towards further financial integration in the euro area and towards the Capital Markets Union. The new set of harmonized rules will enter into force with the launch of the ECMS, which is scheduled for 18 November 2024.
To this end, the ECB has adopted a Guideline on the management of collateral in Eurosystem credit operations (ECB/2024/22). The reform has implied the amendment of the Guideline (EU) 2015/510 on the implementation of the Eurosystem monetary policy framework (ECB/2014/60). Additionally, the ECB has published an Information for Eurosystem counterparties, which details the main topics of the reform (e.g., account and pool structure, collateral mobilization and demobilization, auto-collateralization, credit position management), as well as its background.
Sustainability Regulations: Further clarifications on EU corporate sustainability reporting rules
On 7 August 2024, the European Commission has released new FAQs on the EU corporate sustainability reporting rules laid down in the Corporate Sustainability Reporting Directive (CSRD), as well as the Accounting Directive, the Audit Directive, the Audit Regulation, the Transparency Directive, the Sustainable Finance Disclosures Regulation (SFDR), and the European Sustainability Reporting Standards (Commission Delegated Regulation (EU) 2023/2772).
As the first set of companies subject to the reporting requirements under these rules will need to start reporting in 2025, the objective of the FAQs is to address the input received from stakeholders and support them in the implementation of the reporting rules, while reducing the administrative burden and minimizing the need for external advice. In this respect, the FAQs clarify several technical issues, such as the scope of application of the rules, application dates and exemptions. For instance, the FAQs address the question whether EU subsidiaries or branches are under an obligation to publish a sustainability report under the Accounting Directive, specifying that at least one such report needs to be disclosed by one subsidiary or branch in each Member States.
Additionally, the FAQs and provide an overview of the sustainability reporting requirements introduced by the CSRD, sustainability information to be reported under the Accounting Directive, the assurance of sustainability reporting, key intangible resources, requirements for third-country undertakings, and the SFDR.
On 21 August 2024, the European Securities and Markets Authority (ESMA) has released the translation in all official EU languages of its Guidelines on funds’ names using ESG or sustainability-related terms that was first published in May 2024. The Guidelines will start applying three months after the publication of the translation, i.e. on 21 November 2024. For further information on the Guidelines, you may consult the SAFE Regulatory Radar in May 2024.
EBA: Report on creditworthiness assessment practices of non-bank lenders
On 7 August 2024, the European Banking Authority (EBA) published a report on its first fact- finding exercise on creditworthiness assessment practices of non-bank lenders. The objective of the report is to assess the extent to which non-bank lenders contribute to over-indebtedness and arrears. The main finding of the report is that while some non-bank lenders could serve segments of the population with limited access to traditional banks’ credit options, a significant amount of non-bank lenders seem to follow inadequate practices for information gathering and verification.
Additionally, the Report concludes that the lack of a harmonized definition of NBLs (non-bank lenders) and a harmonized authorization framework in the EU contribute to different types of NBLs being supervised according to different practices across EU jurisdictions. However, the EBA observes that the increase in the number and importance of these entities increases the need for specialized resources within NCAs to supervise non-banking activities.
In this respect, the EBA declared that, depending on the finding and the needs deriving from further studies, it may initiate further ad hoc action to foster further protection of EU consumers.
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Pietro Chiarelli is Financial Policy Analyst at the SAFE Policy Center.
