The Joint Committee of the European Union, consisting of the European Banking Authority (EBA), European Securities and Markets Authority (ESMA), and European Insurance and Occupational Pensions Authority (EIOPA), has recently published its 2023 annual report. The report emphasizes the committee's attention to crucial cross-sectoral issues that will significantly impact the financial industry.
Key Takeaways for Financial Firms
Risk Management is Paramount: Firms must prioritise risk management amid a volatile economic and geopolitical landscape. This means staying alert to potential asset quality deterioration, monitoring inflation risks, and ensuring adequate capital buffers. Cybersecurity is also a significant concern, requiring investment in robust ICT infrastructure.
Sustainable Finance Takes Center Stage: The report emphasises the ongoing development of the Sustainable Finance Disclosure Regulation (SFDR). Firms must adapt to the evolving requirements around Principal Adverse Impacts (PAI) and financial product disclosures to demonstrate their commitment to sustainability.
Digital Operational Resilience is Key: The Digital Operational Resilience Act (DORA) will be implemented in 2025, so firms need to prepare for stricter ICT risk management, incident reporting, and resilience testing. Understanding and mitigating third-party risks is also crucial.
Financial Innovation and Consumer Protection Go Hand in Hand: The report highlights the importance of monitoring FinTech developments, especially those related to BigTechs offering financial services. Simultaneously, consumer protection remains a top priority, requiring firms to comply with regulations like PRIIPs and prioritise consumer education.
Additional Regulatory Changes: Firms involved in securitisation, financial conglomerates, and central clearing should be prepared for upcoming regulatory changes, including new reporting templates and ESG disclosure requirements.
Data Transparency with ESAP: The European Single Access Point (ESAP) is on the horizon, and firms should be ready to provide data to this centralised platform, ensuring transparency and accessibility of financial information.
Staying Ahead of the Curve
The 2023 annual report from the EU Joint Committee serves as a guide for financial firms as they navigate the constantly evolving regulatory environment. By comprehensively understanding and proactively addressing the main points, firms can guarantee compliance, manage risks, and capitalize on new opportunities in the changing financial landscape.