to the point: financial regulation | 03/2025

·      The Council has adopted a new Regulation that aims to reduce the regulatory burden on EU companies, particularly SMEs, by streamlining reporting requirements and refining the scope of benchmark rules. For relevant persons, entities and businesses, this means that administrators of non-significant benchmarks in the EU will be exempt from the regulation, leaving only critical and significant benchmarks under its scope. Administrators outside the regulation's scope may opt in voluntarily under specific conditions. The ESMA will have extended oversight powers, ensuring stricter supervision of EU Climate Transition and Paris-Aligned Benchmarks to prevent misleading ESG claims. Additionally, a specific exemption regime will apply to spot foreign exchange benchmarks. These changes are part of a broader EU effort to simplify financial reporting, cut administrative burdens by 25 % and maintain regulatory efficiency without compromising key policy objectives. The regulation is set to apply from 1 January 2026, requiring businesses to adapt their compliance and reporting processes accordingly.

·      The EBA has updated its methodology for assessing the regulatory and supervisory frameworks of non-EU countries, introducing changes that impact relevant financial institutions and authorities. For obliged persons, particularly financial entities operating across jurisdictions and regulatory bodies seeking equivalence recognition, the new methodology aligns with the revised Capital Requirements Regulation (CRR) and Capital Requirements Directive (CRD). The assessment process remains structured around a two-step questionnaire, with the second step now streamlined for better usability. Additionally, the entire process has been digitised, allowing non-EU jurisdictions to submit responses via a secure online platform.

·       The EBA has updated its Implementing Technical Standards (ITS) on the joint decision process for internal model authorisation under the Capital Requirements Regulation (CRR), introducing key changes that impact relevant financial institutions. For obliged persons, particularly banks and financial entities using internal models for regulatory purposes, the revised standards mean that the use of internal models for operational risk has been removed, eliminating the possibility of applying the Advanced Measurement Approach (AMA). Additionally, the amendments reflect changes to the supervisory framework, updating references to Implementing Technical Standards (ITS) and Regulatory Technical Standards (RTS) related to supervisory colleges.

·       The ESMA has published a Peer Review Report on the supervision of Simple, Transparent and Standardised (STS) securitisations, providing recommendations for National Competent Authorities (NCAs) to enhance their supervisory frameworks. For relevant persons, including originators, sponsors and securitisation special purpose entities, this means increased scrutiny and a more structured supervisory approach to ensure compliance with STS requirements. The ESMA advises NCAs to adopt both transaction-based and entity-based supervision, strengthen risk assessment frameworks, and allocate sufficient resources to oversee STS transactions effectively. As the regulatory framework undergoes further review, relevant entities must remain prepared for evolving supervisory expectations and potential adjustments in compliance obligations.

·       The ESMA has released a Statement in which it clarifies the treatment of settlement fails under the CSDR penalty mechanism, following a major incident affecting TARGET Services in February 2025. For relevant persons, particularly Central Securities Depositories (CSDs) and market participants, this means that National Competent Authorities (NCAs) do not expect CSDs to apply cash penalties for settlement fails on 27 and 28 February 2025, as these failures were caused by an infrastructure malfunction beyond the control of participants. This aligns with existing CSDR guidance, which states that penalties should not be applied when settlement disruptions occur due to external factors unrelated to the involved parties. The clarification provides certainty to market participants and reinforces the principle that penalties should only be imposed in cases where settlement fails are attributable to the parties involved.

·     The Government is currently preparing an Amendment (in Czech only) to Act No. 257/2016 Coll., on Consumer Credit, which transposes Directive (EU) 2023/2225, introducing significant changes for obliged persons such as credit providers and intermediaries. It strengthens authorisation requirements and imposes stricter rules on consumer interactions to ensure transparency and fair treatment. Obliged persons must conduct more thorough creditworthiness assessments to prevent irresponsible lending. Information obligations are expanded, requiring clearer and more comprehensive disclosure both before and during the contractual relationship to support informed consumer decision-making. The regulation of credit products is tightened, reinforcing consumer rights, including stronger withdrawal rights. Additionally, the amendment introduces stricter price caps on credit and establishes more stringent rules for debt recovery, aiming to prevent abusive enforcement practices. With the law set to take effect from 20 November 2026, obliged persons must adapt their processes and compliance frameworks to align with the new regulatory requirements.

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·       The Government has approved and sent to the parliament a Draft Act (in Czech only) amending certain financial market laws in relation to the regulation of branches of foreign banks from non-Member States, the regulation of certain offences and the strengthening of the powers of the supervisory authority and its independence, introducing significant changes for obliged persons, particularly in the regulation of foreign bank branches from non-Member States, supervisory powers, and administrative penalties. The Draft Act transposes CRD VI and aligns with CRR III, further implementing Basel III to strengthen the resilience of the European banking sector. For obliged persons, this entails stricter regulatory requirements, particularly regarding access to the market for third-country branches, enhanced supervisory oversight of asset transfers, acquisitions, mergers and capital management, as well as the introduction of new capital requirements, including minimum exit thresholds. Additionally, there are reinforced obligations related to environmental, social and governance (ESG) risks, along with stricter corporate governance rules, including a more rigorous assessment of management and key function holders. The expansion of supervisory powers and the tightening of administrative sanctions will require obliged persons to reassess their compliance strategies to align with the strengthened regulatory framework.