SIFMA concern over SEC proposal
The Securities Industry and Financial Markets Association (SIFMA) has expressed support for keeping trading venue rules up to date with technological and market developments but has noted concerns about the Securities and Exchange Commission’s (SEC) proposal to redefine what constitutes an exchange and expand Regulation ATS (alternative trading systems). SIFMA believes the proposal is not appropriately tailored to its intended goals.
SIFMA is concerned that the SEC’s attempt to include decentralized finance (DeFi) systems within the scope of Rule 3b-16 and Regulation ATS could also subject many non-DeFi systems to unnecessary regulation. In the report, SIFMA suggests that separate rules tailored specifically to the functioning and complexities of DeFi systems would be more appropriate.
SIFMA believes that the SEC’s proposal represents a significant expansion of regulatory scope and obligations, unrelated to identifying specific problems that require attention. This expansion, it suggests, raises “troubling consequences”.
ESMA publishes latest newsletter
The European and Securities and Markets Authority (ESMA) has published its latest Spotlights on Markets newsletter. The latest issue covers the three European Supervisory Authorities (EBA, EIOPA and ESMA – ESAs) greenwashing progress reports; an update on stress testing for central counterparties; as well as articles on unregulated products, undue costs in funds and the ESA joint annual report.
The newsletter also outlines future speaking engagements and current consultations.
“Much done, much more to do – climate risks and the banking sector”
Sharon Donnery, Deputy Governor, Central Bank of Ireland and Member of the Supervisory Board of the European Central Bank (ECB) has been speaking at the BPFI Retail Banking Conference 2023. In her speech, Donnery addressed ESG integration in the banking sector, covering several themes. Donnery noted her expectation that the financial sector should be taking a leading role in addressing the climate challenge and how “embedding climate-related and environmental risk management in the banking system ges to the very heart of what we [the ECB] do”.
Outlining the findings of supervisory exercises carried out in 2022, she noted several findings including:
- Considerable progress has been made with respect to banks’ climate stress-testing capabilities, but there are many deficiencies, data gaps and inconsistencies across institutions.
- Many banks also appeared to lack clearly defined long-term strategies for credit allocation policies that reflect the various transition paths, or are in the initial stages of factoring climate risk into their credit risk models.
- Banks need to invest more in climate-relevant data collection and become less dependent on the use of proxies.
- Banks need to better understand how climate risks impact their business models, their strategies do not address all risks comprehensively.
- While organizational structures have improved, they are still in the early stages of tackling climate risks in a detailed comprehensive manner.
- From a risk management perspective, again while progress has been identified in the development of methods to measure climate risks, only 25% of banks can call on advanced methods.
Pointing out that addressing these issues is hard but necessary, Donnery reminded the audience that “by the end of 2024, we and the ECB expect significant institutions to meet all remaining supervisory expectations on climate and environmental risks, including full integration in the Internal Capital Adequacy Assessment Process (ICAAP) and stress testing.”
Q&A with Andrea Enria, Chair of the Supervisory Board of the ECB
In a conversation at the Goldman Sachs European Financials Conference on 13 June 2023, Andrea Enria, Chair of the Supervisory Board of the ECB addressed a number of different topics including, amongst other subjects, recent banking turbulence; the failure of Credit Suisse; asset quality; liquidity requirements and exposure to the Russian market.
A selected summary of key developments for regulated financial institutions
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