07 November 2024
Schoenherr publication
czech republic
poland
hungary
to the point: financial regulation | 10/2024
Welcome to our to the point newsletter. Every month, we are looking back at the most relevant developments in the area of financial regulation in the CEE region.
In this edition, you will get a mix of updates:
- ESAs have published their Final Report on the draft implementing technical standards (ITS) for the European Single Access Point (ESAP), which is being developed as a centralised system to simplify and standardise access to critical financial and sustainability information across the EU. The report outlines key requirements for collection bodies, entities designated to gather and submit data to the ESAP. These bodies include Officially Appointed Mechanisms (OAMs), EU offices and agencies, and national authorities. Under the new ITS, collection bodies are given specific guidance on the timelines, formats and metadata necessary for the data submissions they handle. They are required to ensure that information submitted by reporting entities – such as companies and financial institutions – is validated through specific checks for accuracy and compliance. In addition to the collection bodies' roles, the ITS define core functionalities for the ESAP itself. These include categorising data by industry and organisation size, establishing a unified identification system for reporting entities, and specifying the types of financial and sustainability information the ESAP should contain. A notable feature is the development of a public Application Programming Interface (API), which will allow data users, including investors, researchers and other stakeholders, to retrieve and utilise information efficiently. For organisations affected by these rules, the ESAP requirements mean they will need to submit their financial and sustainability data in a structured, consistent format. These entities will also need to comply with validation checks and metadata specifications to ensure their data meets the quality standards of the ESAP. For users, the ESAP promises a streamlined, one-stop resource for comprehensive information on financial performance, sustainability metrics and compliance data, making regulatory and research processes more efficient and transparent.
- The EBA has released a draft technical package for its new 4.0 reporting framework (according to FAQ the final version of this package will be released in December 2024). The package aims to help financial entities adapt to the changes in data requirements and the updated Data Point Model (DPM) 2.0. It includes specifications such as validation rules, DPM and XBRL taxonomies that will apply to key reporting obligations, including those for asset-referenced tokens (ARTs), electronic money tokens (EMTs) and supervisory reporting aligned with recent EU Banking Package updates (CRR III and CRD VI). For entities affected by these changes, including token issuers and class 2 investment firms, the new framework means adapting to an updated reporting structure and utilising both the existing DPM 1.0 and the new DPM 2.0 formats during the transition. The EBA has also updated its DPM Query Tool to reflect the draft release, providing entities with a means to better understand the changes. Additionally, a set of Q&As will accompany the December final version, which will integrate suggestions from the ESAs following the European Commission's recent feedback under the Digital Operational Resilience Act (DORA).
- The EBA has published a Decision outlining procedures for assessing the significance of asset-referenced tokens (ARTs) and e-money tokens (EMTs) and managing supervisory responsibilities for significant tokens (s-ARTs and s-EMTs). Under the MiCAR, the EBA is responsible for conducting these significance assessments, which may shift supervisory authority from national bodies to the EBA. It also mandates the formation of supervisory colleges to oversee s-ARTs and s-EMTs. Key procedural aspects for issuers include:
- Reporting Requirements: Issuers of s-ARTs and s-EMTs now have defined obligations for providing data critical to establishing supervisory colleges, supported by a standardised reporting calendar with specified deadlines;
- Consultation Procedures: For significant assessments, the EBA will consult with national authorities, the issuer's home national competent authority (NCA), the European Central Bank (ECB), and relevant central banks, following a set timeline and procedural steps;
- Supervisory Transitions: The decision establishes steps to ensure smooth transitions when supervisory control over significant tokens moves from NCAs to the EBA, helping issuers manage regulatory shifts efficiently; and
- Templates for Compliance: To streamline compliance, templates are provided for voluntary classification requests and for the consultation process on significant status decisions, ensuring clear communication and feedback among issuers, NCAs and the EBA.
- The ESMA has published updates to the Q&As on transparency and market structure issues (for deleted and amended Q&As see here). Moreover, the ESMA has published a Manual on post-trade Transparency (a convergence tool to promote common approaches and practices in the areas of post-trade transparency and transparency calculations) and an Opinion on the assessment of pre-trade waivers considering MiFIR Review Transitional Provisions.
- The EBA has published a Final Report on Guidelines on redemption plans under MiCAR to establish a structured and orderly redemption process for holders of asset-referenced tokens (ARTs) and e-money tokens (EMTs) in the event of a crisis affecting the token issuer. Under these Guidelines, issuers of ARTs and EMTs must develop a comprehensive redemption plan that addresses several critical areas. This includes defining a structured approach for the liquidation of reserve assets, specifying the types of claims that token holders can make and mapping out essential operational activities. Issuers are also required to detail each step of the redemption process and the conditions that could trigger the activation of the redemption plan by authorities. The Guidelines also consider industry feedback, introducing adjustments for greater clarity and flexibility. For example, some provisions concerning the liquidation of ART reserve assets can be adapted for EMT issuers, allowing for practical application across both token types.
- The Council has officially adopted the listing act (regulation and directive), a comprehensive legislative package designed to enhance the appeal and accessibility of EU public capital markets for companies across all sectors and sizes, particularly small and medium-sized enterprises (SMEs). For companies already listed or preparing to list, this act offers simplified procedures that can reduce time and expenses associated with regulatory compliance while ensuring the preservation of key protections for investors and maintaining overall market integrity. Easier access to funding and more flexible options will allow companies, especially SMEs, to diversify their financial resources and expand their operations with greater financial stability. The listing act also introduces a new directive on multiple-vote shares, which provides a structured framework allowing companies to issue shares that carry different voting weights.
- The ESMA has published a report called "From Black Box to Open Book?", detailing guidance for insurance companies applying IFRS (International Financial Reporting Standard) 17 for the first time in their 2023 financial statements. Based on a desktop review of 16 insurance companies, it assesses compliance with the ESMA's guidelines on alternative performance measures (APMs) and examines areas such as the impact of IFRS 17, transition provisions, accounting policies, judgments, estimates and the application of IFRS 9 (Financial Instruments). The findings indicate that, while most companies have adequately met the disclosure requirements, improvements are needed in specific areas. These include providing greater detail and transparency, particularly regarding transition provisions, accounting policies, judgments and estimates. The ESMA also notes a lack of entity-specific information in certain disclosures, suggesting companies could enhance the clarity and usefulness of their financial reporting.
- The Czech Government is currently discussing an amendment (Czech language only) to Act No. 21/1992 Coll., on Banks (and on other related laws) in the comment procedure. The amendment implements Directive (EU) 2024/1619 (CRD VI) and adapts the Czech legislation to Regulation (EU) 2024/1623 (CRR III), as the amendment is the final step towards the implementation of Basel III in the EU. At the same time, the package revises existing or introduces new, purely European harmonised regulation beyond the implementation of this standard, particularly in the area of:
- administrative penalties;
- access to third-country branches;
- the powers of supervisors in transfers of assets or liabilities, acquisitions and disposals of significant holdings by credit institutions, mergers and divisions;
- ESG risks; and
- the regulation of the system of governance and the assessment of members of the management body and key function holders.
- The Bank Board of the Czech National Bank decided to change the minimum reserve requirement. The current rate of 2 % will increase to 4 % of the reserve base, excluding repo liabilities. This applies to banks, foreign bank branches and credit unions. The new rate will take effect on 2 January 2025, on the first day of the new reserve maintenance cycle.
- The draft concerns the adaptation of Polish law to EU Directive 2021/2167, aimed at organising the market of non-performing loans (NPLs) that are included in their balance sheets and reducing the risk of future accumulation of NPLs. In Poland, the project of the Act aims to increase market transparency and strengthen market stability, which is particularly important in the context of financial risk management.
- The rules will include consumer protection and risk management requirements, among others. This will require strict control by the Financial Supervisory Commission (UKNF). However, the new regulations will be expensive, which may be a challenge for smaller companies. The expected transitional period until June 2024 is assessed by the market as too short. However, Katarzyna Przewalska from the Ministry of Finance has assured that the Crypto-Assets Act is expected to pass through the legislative stages to come into force in early 2025. Zbigniew Wiliński (UKNF) stressed that the authority is ready to implement the MiCA due to earlier legal, organisational and technological preparations to ensure smooth issuance of licences once the law is adopted.
- The National Bank of Hungary (NBH), in cooperation with the national Supervisory Authority of Regulated Activities (SZTFH), issued a guideline (No. 9/2024.) aiming to establish a standardised questionnaire for financial organisations to use during credit risk assessment, complying with the relevant EU regulations. Alignment with EU Directives (NFRD, CSRD) and Standards (EFRS) ensures that the ESG information collected in Hungary meets global standards, making Hungarian sustainability reports more comparable and reliable.
The new guideline applies to Hungarian financial institutions and branches of foreign institutions in Hungary, and outlines a phased implementation plan, with different compliance deadlines based on the size of the loan agreements. In addition to requiring the application of a standardised questionnaire, the guideline also aims to reduce administrative burdens for customers.
Financial organisations are expected to apply the recommendation to new corporate loans exceeding HUF 500m (approx. EUR 1,244,986) from 1 July 2025, with progressively lower thresholds in subsequent years (HUF 350m from 2026, HUF 200m from 2027 and HUF 100m from 2028). Financial institutions may voluntarily apply the questionnaire even for lower contractual amounts or from earlier dates.
Incompliance with the guideline, financial organisations must publish information on their website from 1 January 2025, in which they draw the attention of customers to the requirements regarding the collection of ESG information.
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Kristýna
Tupá
Attorney at Law
czech republic