Financial Services SpeedRead- Germany: 31 May 2024 edition
31 May 2024
Welcome to the sixth edition of the Germany specific Financial Services SpeedRead, a collection of bite-sized updates designed to help you keep on top of key regulatory developments in financial services over the preceding fortnight. Please get in touch if you want to explore any of the topics covered in this fortnight's edition of Financial Services SpeedRead in more detail.
Financial Markets
No new entries.
Banking and Prudential
1. Single Resolution Board: Policy: 2024 Minimum Requirements for Own Funds and Eligible Liabilities Policy
On 14 May 2024, the Single Resolution Board (SRB) published its updated policy on the Minimum Requirements for Own Funds and Eligible Liabilities (MREL) (the 2024 MREL Policy), with an accompanying press release.
The 2024 MREL Policy takes into account a public consultation held between 14 December 2023 and 13 February 2024. In summary, the 2024 MREL Policy introduces (i) a revised approach on internal and external Market Confidence Charge calibration and on the monitoring of MREL eligibility; and (ii) legislative changes to the MREL framework related to entities in a "daisy chain" and to liquidation entities brought in by Directive 2024/1174. A track changes version of the 2024 MREL Policy is also available.
The SRB also published its MREL dashboard which presents the evolution of MREL targets and shortfalls in the last quarter of 2023. The dashboard also highlights recent developments in the cost of funding and provides an overview of gross issuances of MREL-eligible instruments.
Fund Management
2. ESMA: Call for Evidence: Call for Evidence on the review of the UCITS Eligible Assets Directive
On 7 May 2024, ESMA issued a call for evidence following the European Commission's formal request for ESMA to provide technical advice on the review of the UCITS Eligible Assets Directive (EAD).
The European Commission has mandated ESMA to assess the implementation of the UCITS EAD in the Member States and to consider whether there are any divergences in this area, as well as to provide a set of recommendations on how the EAD should be revised to keep it aligned with market development. Accordingly, ESMA is gathering stakeholder input to assess the direct and indirect exposures to certain asset classes that may give rise to divergent interpretations and/or risk for retail investors (such as structured/leveraged loans, catastrophe bonds, emission allowances, commodities, crypto assets, unlisted equities).
Stakeholders are to provide their feedback by Wednesday 7 August 2024.
Senior Managers and Governance
No new entries.
Financial Crime
No new entries.
Retail Services
No new entries.
Digital Finance and Fintech
3. ESMA: Letter: Letter from the European Commission on the Distributed Ledger Technology Pilot Regime Implementation
On 7 May 2024, the European Commission published a letter (dated 3 May 2024) sent by Mairead McGuinness, European Commissioner for Financial Services, Financial Stability and Capital Markets Union, to Verena Ross, ESMA Chair, on the implementation of the EU DLT Pilot Regime. The response follows a letter published by ESMA in April 2024, as detailed in the April 2024 edition of the Ashurst Global Digital Assets Digest.
In the letter, Ms McGuinness notes confusion amongst market participants about the duration of the DLT Pilot Regime, confirming that there is no expiration date for the regime. Ms McGuinness confirms that any changes to the DLT Pilot Regime (including its termination) would only occur if the European Commission submits a new legislative proposal that is then agreed by EU co-legislators. The framework is likely to continue to apply in its current form if no proposal is made to amend it.
For more information on the DLT Pilot Regime, please see our guide here.
Payments
No new entries.
ESG
4. ESMA: Final Report: Guidelines on funds' names using ESG or sustainability-related terms
On 14 May 2024, ESMA published its final report containing the guidelines on funds' names using ESG and sustainability-related terms (Guidelines).
The Guidelines seek to ensure that investors are protected against unsubstantiated or exaggerated sustainability claims in fund names, while also providing asset managers with clear and measurable criteria to assess their ability to use ESG or sustainability-related terms in fund names. Notably, as compared to the draft guidelines published as part of the earlier consultation, the final Guidelines:
- remove the threshold of 50% in sustainable investments for the use of sustainability-related words in funds' names;
- apply exclusion criteria according to the rules of the Climate Transition Benchmark for terms that are transition, social and governance related and apply the exclusion criteria according to the rules of the Paris-aligned Benchmarks for environmental, impact and sustainability related terms;
- separate the terms related to social and governance from environmental terms;
- introduce a requirement for fund managers using any "impact"-related words to ensure that the investments under the minimum proportion of investments are made with the intention to generate positive, measurable social or environmental impact alongside a financial return; and
- introduce a requirement for fund managers using any "transition"-related words to demonstrate that the investments are on a clear and measurable path to social or environmental transition.
The Guidelines will apply three months after the date of their publication on ESMA's website in all EU official languages. Any new funds created after the application date will be required to comply with the Guidelines immediately, whereas existing funds will have a transitional period of six months after the application date to comply.
Other
No new entries.
