EBA, EIOPA and ESMA propose amendments to bilateral margin requirements 03 August 2026 Joint Committee Trading The European Supervisory Authorities (EBA, EIOPA and ESMA – the ESAs) today published a final report on draft Regulatory Technical Standards (RTS), proposing to simplify the bilateral margin requirements of the European Commission’s Delegated Regulation (EU) 2016/2251. The proposed amendments aim to simplify the bilateral margin framework for counterparties that are subject to initia...
The ESAs have issued a Final Report and draft RTS proposing targeted amendments to Delegated Regulation (EU) 2016/2251 so that counterparties below the EUR 8 billion initial margin threshold under EMIR are fully exempt from exchanging initial margin, both on new and existing uncleared OTC derivatives. This materially simplifies bilateral margining for smaller in-scope counterparties, reduces operational and custodial burdens, and aligns the EU regime with similar reforms already implemented in other jurisdictions (e.g. UK EMIR). Compliance teams must prepare now for the transition from a “legacy-only” margining obligation to a complete exemption once the EUR 8 billion AANA threshold is no longer met.
What Changed
- - Counterparties whose average aggregate notional amount (AANA) of non-centrally cleared OTC derivatives falls below the EUR 8 billion threshold will no longer be required to exchange initial margin...
- The current framework, under which below-threshold counterparties are exempt from initial margin for new trades but must continue to exchange initial margin for pre-existing “legacy” contracts, will...
- Article 28(1) of Delegated Regulation (EU) 2016/2251 will be amended to explicitly extend the exemption from initial margin requirements to outstanding contracts where one of the two counterparties...
- The RTS introduce a clearer operational framework for entry into and exit from the initial margin regime based on the annual AANA calculation for March–May, including scenarios where one or both...
- Once a counterparty falls below the EUR 8 billion threshold under the revised rules, firms will be permitted to terminate related initial margin processes, including ceasing ongoing calculation,...
Suggested Considerations
- Map all EMIR in-scope entities within the group and identify those whose AANA of non-centrally cleared OTC derivatives is close to or below the EUR 8 billion threshold, to assess which relationships may benefit from the expanded exemption.
- Review current collateral and margin frameworks to identify legacy contracts where initial margin is still being exchanged solely because the regime requires continuation despite the counterparty having fallen below the EUR 8 billion threshold.
- Prepare an internal policy update so that, once the RTS enter into force, initial margin requirements are switched off for counterparties below the EUR 8 billion threshold on both new and existing uncleared OTC derivatives, subject to group risk appetite.
- Update EMIR margin procedures and AANA calculation processes to ensure accurate annual determination of whether each counterparty is above or below the EUR 8 billion threshold, including documentation of the March–May calculation methodology.
- Review and amend collateral agreements, credit support annexes (CSAs) and associated legal documentation to incorporate the revised treatment for below-threshold counterparties, including terms for stopping margin exchange and potentially releasing segregated collateral.
Key Dates
- ESAs publish the Final Report and draft RTS proposing amendments to Delegated Regulation (EU) 2016/2251 to simplify bilateral margin requirements for counterparties below the EUR 8 billion initial margin threshold
- The European Commission reviews and, if satisfied, endorses the draft RTS amending the EMIR bilateral margin Delegated Regulation; exact date to be set by the Commission’s internal process
- Following Commission endorsement, the RTS are subject to scrutiny by the European Parliament and the Council under the standard RTS procedure before publication in the Official Journal
- The amended RTS enter into force on the date specified in the Official Journal (typically 20 days after publication), from which firms can legally apply the new exemption regime
- By the date three years after entry into force, the ESAs must complete a review of the application and impact of the exemption from initial margin requirements in Article 28(1), potentially informing further changes
Compliance Impact
The amendments reduce the risk of technical non-compliance for below-threshold counterparties by simplifying obligations, but firms that fail to correctly apply the new threshold-based exemption (e.g. continuing or ceasing margin exchanges incorrectly) may face supervisory findings, remediation demands and potential sanctions under EMIR. Non-compliance could also create contractual disputes and counterparty risk misalignment if margin treatment is inconsistent across jurisdictions or relationships.
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On 10 February 2025, the ECB published a clarification paper tightening expectations on ICAAP and ILAAP design and, critically, on how and when related information must be submitted in the SREP cycle. The core compliance impact is a shorter annual submission deadline, a two‑step (annual plus continuous) reporting model, and more formalised governance, forward‑looking planning, and capital distribution expectations that must be demonstrably embedded in banks’ ICAAP/ILAAP frameworks and Board‑level oversight.
What Changed
- - Introduced a two‑step ICAAP/ILAAP submission model under the SREP: (1) annual submission of the main “ICAAP & ILAAP package” by 15 March and (2) continuous, year‑round submission of any new or...
- Shortened the standard annual deadline for ICAAP/ILAAP information from 31 March to 15 March, reducing the preparation and governance window by roughly two weeks versus prior practice.
- Confirmed that the clarifications apply from the SREP 2025 cycle onwards, with a general transition approach for 2025 and limited transitional flexibilities for banks whose internal processes cannot...
- Required inclusion of two distinct, concise documents within the annual packages: a “Capital Adequacy Statement” and a “Liquidity Adequacy Statement” reflecting the management body’s formal view on...
- Clarified governance expectations around capital and liquidity planning, including regular updates of governance frameworks to reflect external conditions and the submission of a complete risk...
Suggested Considerations
- Review existing ICAAP and ILAAP submission calendars and internal governance timelines and formally reset them to ensure core packages can be prepared, approved by the management body, and submitted by 15 March each year.
- Design and implement a documented two‑step submission process, including procedures for continuous, year‑round identification, approval and transmission to the ECB of any new or materially updated ICAAP/ILAAP‑relevant documents.
- Develop, approve and embed the new Capital Adequacy Statement and Liquidity Adequacy Statement, ensuring they reflect the management body’s signed‑off view on adequacy and are supported by clear references to ICAAP/ILAAP analyses and results.
- Update ICAAP and ILAAP governance frameworks to reflect ECB expectations, including explicit roles and responsibilities, escalation paths, periodic reviews triggered by external developments, and Board‑level oversight of capital and liquidity planning.
- Compile and maintain a comprehensive risk inventory covering both normative and economic perspectives, and ensure it is aligned with business models, risk appetite frameworks, recovery plans, stress testing programmes and SREP submissions.
Key Dates
- Recurring annual deadline for submission of the core ICAAP and ILAAP packages, including the Capital Adequacy Statement, Liquidity Adequacy Statement, risk inventory, stress testing information and liquidity stressed assumptions template
- ECB publishes the clarification paper on ICAAPs and ILAAPs and respective package submissions, setting out new expectations on governance, content and submission processes
- For the SREP 2025 cycle only, general transition date by which all documents foreseen for annual submission must be provided to the ECB, marking the first application of the new two‑leg submission process and shortened deadline
- New general submission date for ICAAP and ILAAP information becomes effective, replacing the former 31 March deadline for annual packages and applying to ICAAP quantifications, ILAAP templates and other annual information
- Ongoing, year‑round obligation to submit to the ECB any new or significantly updated ICAAP/ILAAP‑relevant documents, together with a description and justification of changes and their implications for capital and liquidity adequacy
Compliance Impact
Non‑compliance with the revised ICAAP/ILAAP expectations and submission deadlines can trigger SREP findings, higher Pillar 2 capital requirements, restrictions on distributions, and enhanced supervisory scrutiny. Persistent deficiencies in governance, buffers and forward‑looking adequacy assessments may also lead to qualitative measures, remedial action plans, and potential sanctions under the SSM framework.
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ESMA publishes technical standards on CCP admission criteria elements 08 July 2026 CCP Guidelines and Technical standards The European Securities and Markets Authority (ESMA), the EU’s financial markets regulator and supervisor, has published its Final Report on the Regulatory Technical Standards (RTS) concerning the central counterparties’ (CCPs) admission criteria elements , following the review of the European Market Infrastructure Regulation (EMIR 3). EMIR 3 introduces amendments to the p...
ESMA’s Final Report on the RTS for CCP admission criteria elements clarifies the factors CCPs must assess when determining who can become a clearing member, with specific attention to **non-financial counterparties** and **sponsored membership**. For compliance teams, the practical impact is that CCPs will need to evidence that their admission criteria are risk-based, proportionate, transparent, and aligned with EMIR 3, while clearing members—especially NFCs—should expect more structured scrutiny of financial resources, operational capability, and membership model fit.
What Changed
- - CCPs must base admission criteria on a comprehensive risk assessment of the risks posed by clearing members and ensure the criteria reflect those risks.
- CCPs must consider whether clearing members have sufficient financial resources to meet obligations arising from participation in the CCP.
- CCPs must assess whether clearing members have access to reliable credit, liquidity, and foreign exchange facilities commensurate with the scale and nature of their clearing activity.
- CCPs must examine the clearing member’s operational capacity to meet CCP obligations, including readiness to support clearing operations and margin obligations.
- CCPs must take account of the client clearing activity of a clearing member, including the relative importance of that activity and the member’s ability to meet margin requirements if clients default.
Suggested Considerations
- CCPs should review their current admission criteria to ensure they are explicitly tied to a documented assessment of risks posed by each clearing member type.
- CCPs should update membership rulebooks and onboarding procedures to reflect the RTS requirement to consider financial resources, operational capacity, and liquidity support arrangements.
- CCPs should build or refine documented methodologies for assessing NFC clearing members’ ability to meet margin and default fund obligations.
- CCPs should ensure sponsored membership frameworks clearly define how the sponsor’s support, the sponsored member’s profile, and relevant risk controls are assessed for eligibility purposes.
- CCPs should prepare to publish clear admission criteria, application steps, timelines, required documentation, and explanations for any category-specific requirements.
Key Dates
- ESMA conducted a public consultation on the draft RTS
- ESMA held a public hearing on the draft RTS
- The consultation period referenced in ESMA’s prior consultation paper closed
- ESMA published the Final Report on the RTS concerning CCP admission criteria elements
08 July 2026); - The RTS will be submitted to the European Commission for endorsement
Compliance Impact
The compliance impact is moderate to high because the RTS will shape how CCPs admit or exclude clearing members and how those decisions must be justified, documented, and disclosed. Failure to align admission frameworks with the final RTS could expose CCPs to supervisory challenge, remediation requirements, and operational delays in onboarding members or updating access terms.
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BankBroker DealerAsset Manager ESMA publishes preliminary findings on the Active Account Requirement and the first Annual Report of the Joint Monitoring Mechanism 06 July 2026 CCP The European Securities and Markets Authority (ESMA), the EU’s financial markets regulator and supervisor, has today published the Interim Report of the Effectiveness of the Active Account Requirement and the First Annual Report of the Joint Monitoring Mechanism . Preliminary findings on the Active Account Requirement Based on available data, ana...
ESMA’s interim report on the EMIR 3 Active Account Requirement (AAR) and the first Annual Report of the Joint Monitoring Mechanism (JMM) confirm that the AAR is operational, materially impacting EU clearing behaviour and beginning to shift activity from Tier 2 (third‑country) CCPs to EU CCPs. For compliance teams, this marks a move from regime design to supervisory assessment: firms subject to AAR must now assume their notifications, clearing patterns, and reporting will be benchmarked against ESMA’s evolving effectiveness methodology and cross‑sectoral monitoring of EU clearing risks.
What Changed
- - ESMA has published an Interim Report on the effectiveness of the Active Account Requirement, covering implementation and market impact during 2025 and early 2026, and explicitly framing this as the...
- ESMA confirms that roughly 500 entities have formally notified ESMA and national competent authorities that they are subject to the AAR, indicating that competent authorities now have a defined...
- Notified entities represent more than 90% of notional outstanding held by EU entities in relevant AAR‑scope derivatives, signalling supervisory focus on a concentrated set of high‑exposure...
- ESMA identifies early signs of increased clearing activity at EU CCPs, particularly among smaller entities, including some full relocation of positions from Tier 2 CCPs to EU CCPs for AAR‑relevant...
- ESMA notes a gradual but limited shift in market shares from systemically important Tier 2 CCPs to EU CCPs in certain AAR‑related products, indicating that supervisors will monitor market‑share...
Suggested Considerations
- Confirm whether your entity (and any funds or branches) is subject to the Active Account Requirement by assessing EMIR clearing obligation status and relevant notional clearing volumes against EMIR 3 thresholds for AAR‑scope derivatives.
- Implement and document annual stress‑testing of the active account arrangements, including at least one test per year, to evidence that positions and new trades can be shifted from Tier 2 CCPs to EU CCPs under stress scenarios.
- Map and quantify exposures to Tier 2 CCPs across AAR‑relevant derivatives, and establish an internal monitoring framework to track shifts in clearing volumes between Tier 2 CCPs and EU CCPs in line with AAR objectives.
- Align trade booking, clearing workflows, and client documentation so that the required minimum number of trades per relevant subcategory and contract class can be cleared through the EU active account on an annual average basis, taking into account representativeness requirements where applicable.
- Prepare to submit the first AAR report by 31 July 2026, ensuring that systems and controls can capture and report activity from 25 June 2025 to 30 June 2026 in accordance with ESMA’s reporting templates and instructions.
Key Dates
– EMIR 3 enters into force, establishing the legal basis for the Active Account Requirement and related RTS framework
– First year of operation of the Joint Monitoring Mechanism, covering monitoring of AAR implementation and broader EU clearing landscape developments, as described in the JMM’s first Annual Report
– Active Account Requirement becomes applicable, starting the reference period for AAR compliance and reporting and triggering obligations to maintain an active account at an EU CCP for specified derivatives
– Approximately 500 entities have notified ESMA and national competent authorities that they are subject to the AAR, marking a key supervisory data‑collection milestone
– Regulatory Technical Standards specifying detailed AAR conditions, including operational obligations, stress‑testing, activity and reporting requirements, enter into force, operationalising how the AAR must be met in practice
Compliance Impact
Non‑compliance with the AAR and associated reporting and operational requirements raises significant supervisory and financial stability concerns, with a high risk of regulatory intervention, enforcement, and potential restrictions on clearing arrangements, especially for firms with large exposures to Tier 2 CCPs. Given ESMA’s explicit focus on effectiveness and systemic risk channels, persistent weaknesses in AAR implementation may also affect prudential assessments, stress‑testing outcomes, and broader supervisory views of CCP and clearing‑member risk management.
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ESMA launches Common Supervisory Action with NCAs on the risk management function 03 July 2026 Risk monitoring The European Securities and Markets Authority (ESMA), the EU’s financial markets regulator and supervisor, is launching a Common Supervisory Action (CSA) on risk management function of UCITS management companies and Alternative Investment Fund Managers (AIFMs) across the European Union. The CSA will be conducted throughout 2026 and 2027, in close collaboration with National Competent...
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ESMA recognises the Clearing Corporation of India Limited as a Tier 1 third-country CCP 01 July 2026 CCP The European Securities and Markets Authority (ESMA), the EU’s securities markets regulator, has recognised The Clearing Corporation of India Limited (CCIL) as a Tier 1 third-country central counterparty (CCP) under the European Market Infrastructure Regulation (EMIR). The recognition allows CCIL to provide clearing services to EU clearing members and trading venues, including banks, inves...
ESMA has recognised The Clearing Corporation of India Limited (CCIL) as a **Tier 1 third‑country CCP** under EMIR, with the recognition effective from **30 June 2026**, allowing CCIL to provide clearing services to EU clearing members and trading venues. This restores and regularises EU firms’ ability to clear eligible Indian markets through CCIL under EMIR Article 25, subject to equivalence, cooperation, and oversight conditions tied to the Reserve Bank of India (RBI) and the Indian CCP regime.
What Changed
- - CCIL is formally recognised as a Tier 1 third‑country central counterparty (TC‑CCP) under Regulation (EU) No 648/2012 (EMIR), allowing it to offer clearing services to EU clearing members and EU...
- The recognition is contingent on an equivalence decision adopted by the European Commission for the Indian regulatory framework applicable to CCPs under EMIR Article 25.
- ESMA has assessed and confirmed effective supervision and enforcement by the Reserve Bank of India (RBI) over CCIL as a prerequisite for recognition.
- ESMA and RBI have put in place cooperation arrangements, formalised through a Memorandum of Understanding, to support ongoing supervisory coordination over CCIL’s activities that affect EU...
- CCIL is now included in ESMA’s updated list of recognised third‑country CCPs, clarifying that EU firms may use CCIL’s clearing services while complying with EMIR’s clearing and risk‑management...
Suggested Considerations
- Confirm and document that CCIL now appears on ESMA’s official list of recognised third‑country CCPs and that its status is Tier 1 under EMIR, updating internal CCP eligibility lists and counterparty approval registers accordingly.
- Review and update internal clearing policies, procedures and governance documents to reflect that EU entities may again clear eligible products through CCIL, subject to EMIR and firm‑specific risk appetite.
- Reassess and formally approve CCIL within the firm’s CCP due‑diligence framework, including credit risk, operational risk, legal risk and jurisdictional risk assessments, taking account of the RMU with RBI and the Tier 1 classification.
- Update EMIR compliance mappings to ensure that trades cleared via CCIL are correctly treated for clearing obligation, risk‑management, reporting and collateral requirements, and that no activity is undertaken through non‑recognised CCPs in India.
- Coordinate with front‑office, clearing operations and collateral management teams to re‑open or adjust clearing access to CCIL (e.g. membership arrangements, client clearing channels, account structures, margin and collateral workflows).
Key Dates
- ESMA’s withdrawal of recognition decisions for six Indian CCPs, including CCIL, took effect under EMIR, prohibiting EU clearing members and trading venues from using those CCPs for EU‑regulated clearing activity
- ESMA and the Reserve Bank of India sign a Memorandum of Understanding establishing supervisory cooperation arrangements for Indian CCPs, including CCIL
- ESMA’s decision recognising CCIL as a Tier 1 third‑country CCP under EMIR takes effect, and CCIL is added to ESMA’s updated list of recognised TC‑CCPs
Compliance Impact
Non‑compliance with EMIR’s requirement to use only recognised third‑country CCPs for clearing in scope activities could expose firms to supervisory action, including potential enforcement, fines and restrictions on clearing activities. The recognition of CCIL materially reduces legal and regulatory risk for EU firms clearing Indian markets, but firms must still ensure their governance, risk and operational controls are aligned with EMIR and the Tier 1 TC‑CCP framework.
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The ECB has imposed a €3.255 million administrative penalty on Banque Internationale à Luxembourg (BIL) for intentionally failing, over three quarters, to apply its approved internal models when calculating expected loss for retail and corporate defaulted exposures, leading to overstated capital and capital ratios. This case is a clear supervisory signal to Significant Institutions and Less Significant Institutions using IRB/internal models that deviations from approved model usage, especially around expected loss and IRB shortfall, will be treated as severe breaches with material sanctions exposure.
What Changed
- - The ECB has reaffirmed that institutions using internal ratings-based (IRB) approaches must apply their approved internal models consistently for expected loss calculation on defaulted retail and...
- The ECB has underscored that the IRB shortfall (difference between expected loss and accounting provisions) must be correctly calculated and deducted from regulatory capital whenever expected loss...
- The ECB has classified intentional failure to apply approved internal models to expected loss calculations as a “severe” breach under its Guide to the method of setting administrative pecuniary...
- The enforcement action confirms the ECB’s readiness to use its sanctioning powers under Article 18 of Council Regulation (EU) No 1024/2013 against internal-model users that misreport capital due to...
- The case highlights that miscalculation of expected loss and IRB shortfall over multiple reporting periods, even without an explicit capital ratio breach of minima, can be sanctioned where capital...
Suggested Considerations
- Review and confirm that all regulatory capital calculations, including expected loss and IRB shortfall for defaulted exposures, consistently use the approved internal models as authorised by the ECB or national competent authority.
- Map and reconcile the internal-model implementation across risk systems, finance, and regulatory reporting to ensure that there are no manual overrides, alternative methods, or parallel calculations that deviate from the approved model specifications.
- Strengthen model risk governance by ensuring that any proposed changes to expected loss methodologies, including for defaulted retail and corporate portfolios, are formally approved by the competent authority before being used in regulatory capital reporting.
- Implement robust controls and periodic testing within Finance, Risk, and Regulatory Reporting functions to detect and prevent misapplication or non-application of approved internal models, with clear escalation procedures for identified discrepancies.
- Ensure that the calculation of IRB shortfall (difference between expected loss and accounting provisions) is independently validated and appropriately deducted from CET1 capital in accordance with CRR and ECB internal models guidance.
Key Dates
- Council Regulation (EU) No 1024/2013 enters into force, granting the ECB sanctioning powers for prudential supervision of credit institutions (contextual basis for this enforcement)
- Start of the period during which BIL failed to apply its approved internal models to expected loss calculation for defaulted retail and corporate exposures, leading to overstated capital
- Second consecutive quarter in which incorrect expected loss and IRB shortfall calculations continued to affect reported capital and capital ratios
- Third consecutive quarter of miscalculation; end of the period identified by the ECB as affected by the breach
- The ECB publishes its decision imposing an administrative penalty of €3.255 million on BIL for the severe breach of its decision on internal models
Compliance Impact
This enforcement action indicates high supervisory sensitivity to internal model governance and capital reporting, with severe classification and multi-million euro penalties where intentional non-use of approved models leads to overstated capital. Non-compliance can result in significant administrative fines, reputational damage, supervisory remediation measures, and potential legal proceedings before the Court of Justice of the European Union.
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The ECB has launched a **comprehensive clean‑up and re‑classification of all its supervisory guidance** (guides, reports, letters, methodologies) to streamline content, remove outdated expectations and explicitly underline that these documents are **non‑binding**. This matters for compliance teams because it changes the **reference set of applicable ECB expectations**, clarifies the status of “supervisory guidance” versus hard law, and introduces targeted revisions in key areas such as ICAAP management buffers, internal models, CRR III implementation and licensing processes.
What Changed
- - The ECB is conducting a comprehensive review of around 130 supervisory publications (guides, reports, letters, methodologies) to assess their relevance, effectiveness and clarity and to align them...
- Approximately 40 supervisory documents have been classified as outdated, superseded or no longer relevant and have been formally discontinued, with the texts remaining accessible but clearly labelled...
- The ECB has updated its classification of supervisory guidance documents to emphasise explicitly that they are non‑binding, do not create new legal obligations and do not replace binding EU or...
- The Guide to the internal capital adequacy assessment process (ICAAP Guide) will be revised to clarify supervisory expectations on the management buffer, explicitly positioning it as the bank’s own...
- The ECB has removed all content on supervisory expectations for the credit conversion factor (CCF) from the Guide to internal models, in anticipation of forthcoming EBA guidelines on CCF, thereby...
Suggested Considerations
- Review the ECB press release and associated lists of discontinued publications to identify any ECB guides, reports, letters or methodologies currently referenced in your internal policies, risk frameworks or model documentation that are now labelled as discontinued.
- Update internal policy inventories, regulatory mapping and compliance registers to reflect the new classification of ECB supervisory guidance as non‑binding and to distinguish clearly between binding EU/national law and non‑binding ECB expectations.
- For banks using the ICAAP Guide, perform a gap analysis of capital planning and management buffer practices against the forthcoming clarified expectations, ensuring internal documentation clearly differentiates management buffers from Pillar 2 requirements and guidance.
- For institutions using internal models for credit risk, remove any reliance on the ECB’s former CCF expectations by re‑mapping modelling policies and documentation to forthcoming EBA guidelines on credit conversion factors and to CRR/CRD provisions, once those guidelines are finalised.
- For risk and finance functions, review the CVA treatment in internal capital and risk methodologies to verify alignment with CRR III and ensure that internal references to ECB guidance (assessment methodology, materiality assessment) are updated to reflect the removed CVA content.
Key Dates
- ECB announces the comprehensive review of around 130 supervisory guidance publications, confirms discontinuation of about 40 outdated documents, and signals targeted and in‑depth revisions for the remaining guidance set
- Revised **Guide to the internal capital adequacy assessment process** is expected to be published “shortly” after the press release, incorporating clarified treatment of the management buffer and its relationship to Pillar 2 guidance
- Removal of supervisory expectations on **credit conversion factor (CCF)** from the **Guide to internal models** and the removal of **CVA references** from the **Guide on assessment methodology** and the **Guide on materiality assessment** are implemented as part of the ongoing review and alignment with EBA guidance and CRR III
- **Public consultations** will be launched on those guidance documents identified as needing substantial revision, ahead of finalising the updated versions
- Publication of the new **report on good practices in governance and risk culture**, replacing the existing Draft guide on governance and risk culture, following finalisation of the revised EBA Guidelines on internal governance
Compliance Impact
The immediate legal risk is limited because the ECB reiterates that its supervisory guidance is non‑binding and does not create new obligations, but misalignment with updated ECB expectations can materially affect SREP outcomes, Pillar 2 guidance, model approvals and licensing decisions. Failure to update internal frameworks, models and governance practices in line with the revised guidance and EBA/CRR III developments may therefore lead to higher capital guidance, increased supervisory findings, delays in approvals and more intensive supervisory scrutiny.
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ESMA contributes to global CCP fire drill exercise 19 June 2026 CCP In November 2025, 38 central counterparties (‘CCPs’) from across the world, together with clearing members, conducted a coordinated fire drill exercise simulating the failure of a hypothetical common participant. Known as the CCP Global International Default Simulation (CIDS), the exercise aimed to promote preparedness and coordination across jurisdictions. ESMA participated in the lead authorities’ group together with Bundes...
ESMA has announced its participation as a lead authority in the 2025 CCP Global International Default Simulation (CIDS), a coordinated multi-jurisdictional default-management “fire drill” involving 38 CCPs and their clearing members, simulating the failure of a common participant in November 2025. This is not a new binding rule but it signals heightened supervisory expectations on default management, cross-CCP coordination, porting, and operational resilience, which EU CCPs and clearing members should treat as de facto supervisory standards.
What Changed
- - Supervisory expectations are raised for standardisation and reduction of fragmentation in CCP default-management procedures and communication conventions, with a strong push toward harmonised...
- Lead authorities explicitly promote greater use of portal-based solutions (rather than ad hoc email or bespoke channels) for communication, information sharing, and auction-related workflows between...
- Authorities call for more realistic testing of porting arrangements, including end-to-end operational tests that reflect real-life constraints (documentation, client consent, timing of transfers, and...
- The lead authorities propose considering a voluntary “market stress overlay” module in future CIDS exercises, creating a coherent cross-CCP macro stress scenario to test whether operational capacity...
- ESMA confirms that global CCP fire drills are now a core component of system-wide resilience expectations, effectively embedding regular multi-CCP default simulations into ongoing supervisory...
Suggested Considerations
- CCPs should review and update their default management procedures to align with emerging cross-CCP standards, including harmonised communication conventions, standardised information templates, and coordinated auction timelines.
- Clearing members should conduct a cross-CCP gap analysis of their default-management playbooks to ensure they can support simultaneous auctions and calls from multiple CCPs without creating operational bottlenecks.
- CCPs and clearing members should implement or upgrade portal-based communication and workflow tools for default events, replacing fragmented email- or spreadsheet-based processes where feasible.
- Clearing brokers and client-clearing firms should test and, where necessary, redesign their porting arrangements (including client consent, documentation, booking models, and operational capacity) to ensure they can port positions and collateral under stressed but realistic timelines.
- Risk and operations teams at CCPs and clearing members should incorporate findings from the 2023 and 2025 CIDS exercises into their internal default-management training, drills, and board reporting on operational resilience.
Key Dates
– Week-long 2023 Global CCP fire drill coordinated by ESMA and other authorities, simulating the default of a hypothetical major clearing member across more than 30 CCPs
– Kick-off meeting for the second industry-led multi-CCP default simulation (CIDS 2025) organised by CCP Global in Singapore, setting parameters and expectations for the 2025 exercise
– Start of the 2025 CCP Global International Default Simulation (CIDS) multi-CCP fire drill window (up to 7 November 2025 for some CCPs), simulating the failure of a hypothetical common participant
– Debrief meeting in Singapore for CIDS 2025 participants to discuss operational outcomes, bottlenecks, and potential improvements
– ESMA and the lead authorities publish the 2025 CIDS key findings and recommendations, outlining expectations for further progress in standardisation, porting, portal-based solutions, and potential market stress overlay modules
Compliance Impact
The immediate legal impact is indirect, as the publication itself does not amend EMIR or introduce binding RTS/ITS, but it clearly elevates supervisory expectations on default management, porting, and operational resilience for CCPs and clearing members. Failure to adapt to these expectations may expose firms to supervisory criticism, remediation demands, and heightened scrutiny of their default management, operational resilience, and governance frameworks.
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ESMA consults on a new simplified approach to updating MMF stress test parameters 05 May 2026 Fund Management Simplification and Burden Reduction The European Securities and Markets Authority (ESMA), the EU’s financial markets regulator and supervisor, has today launched a consultation on a new approach to updating the parameters for stress test scenarios under the Money Market Funds framework. ESMA proposes replacing the current annual amendments to Section 5 of the Guidelines with an annual...
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ESMA launches its sixth stress test exercise for Central Counterparties 30 April 2026 CCP Press Releases The European Securities and Markets Authority (ESMA), the EU’s financial markets regulator and supervisor, today launched its sixth stress test exercise for Central Counterparties (CCPs) . The CCP stress test framework drafted by ESMA for the purpose of this exercise is supported by an adverse market scenario provided by the European Systemic Risk Board (ESRB). Mandated under the European ...
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ESMA launches a call for evidence on the structure of European equity markets 30 April 2026 Trading The European Securities and Markets Authority (ESMA) has published a call for evidence (CfE) presenting a data driven analysis of the evolution of trading in European equity markets between 2022 and 2025, based on MiFIR transaction reporting data. The CfE invites stakeholder feedback on observed trends and their potential regulatory implications. The analysis shows that European equity markets ...
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The ECB imposed a €6.2 million penalty on BofA Securities Europe SA for intentionally breaching market risk reporting requirements between 2022 and 2024. The bank systematically underreported risk-weighted assets by including unauthorized sovereign bond option positions in its internal models, resulting in inflated capital ratios and misrepresented financial strength—a "severe" breach that signals the ECB's heightened enforcement focus on reporting accuracy and internal control governance.
What Changed
- This enforcement action does not introduce new regulatory requirements but rather clarifies existing obligations:
- Internal Models Scope Limitation: Banks must strictly adhere to supervisory permissions when applying internal models approaches; unauthorized asset classes cannot be included regardless of...
- Risk-Weighted Asset Accuracy: RWA calculations must reflect actual supervisory permissions, not theoretical modeling capabilities
- Capital Ratio Integrity: Misreporting of RWAs directly affects CET1 ratios and capital adequacy disclosures, which are fundamental to regulatory reporting
- Intentionality Standard: The ECB's classification of this breach as "intentional" (rather than negligent) indicates that awareness of supervisory limitations combined with non-compliance triggers...
Suggested Considerations
- *Immediate (for all firms with internal models):
- *Audit Internal Models Scope: Conduct comprehensive review of all asset classes currently included in internal models approaches to confirm supervisory permission exists for each category
- *Verify Sovereign Bond Derivatives Treatment: Specifically validate that all sovereign bond options, forwards, and other derivatives are explicitly covered by supervisory approval documentation
- *Reconcile RWA Calculations: Recalculate historical RWAs (at minimum for the past 3-5 years) to identify any unauthorized inclusions and assess whether prior reporting was accurate
- *Strengthen Internal Controls: Implement automated controls to prevent unauthorized asset classes from being included in model calculations, with documented supervisory permission matrices
Key Dates
2024; - Period during which BofA Securities Europe SA committed the breach across six consecutive reporting periods
- ECB penalty announcement and effective date
- Bank has the right to challenge the decision before the Court of Justice of the European Union (no statutory deadline specified, but typically within 2 months of notification)
Compliance Impact
Urgency: CRITICAL
AI-generated analysis. May contain errors or omissions — verify with the
original ECB source
before acting. Full disclaimer.
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ESAs spring risk update highlights geopolitical pressures and rising private finance risks 27 March 2026 Joint Committee Risk monitoring The European Supervisory Authorities (EBA, EIOPA and ESMA – the ESAs) today published their spring 2026 Joint Committee update on risks and vulnerabilities in the EU financial system. The update focuses on the challenges arising from ongoing geopolitical tensions and developments in private finance. Geopolitical tensions continue to pose significant risks Th...
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The ECB imposed a €2.26 million penalty on Nordea Finance Finland Ltd for incorrectly reporting large exposures by assigning guaranteed receivables to debtors instead of guarantors, breaching the 25% capital limit for 13 quarters from 2021-2024 due to serious negligence and internal control deficiencies. This enforcement action underscores the ECB's strict enforcement of large exposure rules under EU banking regulations, serving as a warning for banks on accurate counterparty identification and robust controls. Compliance professionals must prioritize exposure calculation accuracy to avoid severe penalties classified as "severe" under ECB guidelines.
What Changed
- - 2021 Regulatory Change: Prohibits assigning guaranteed receivables to debtors for large exposure calculations; exposures must be assigned to guarantors instead, ensuring proper risk attribution to...
- Large Exposure Limits (CRR): Exposures exceeding 10% of a bank's capital trigger reporting as "large"; no single exposure or group of connected counterparties may exceed 25% of capital.
- Severity Classification: ECB categorizes breaches as "severe" (from minor to extremely severe), guiding penalty calculations per its *Guide to the method of setting administrative pecuniary...
- Broader Framework: EBA Guidelines on large exposures provide criteria for assessing breaches and timelines for returning to compliance, emphasizing harmonized EU application.
Suggested Considerations
- Review Exposure Calculations: Immediately audit methodologies for guaranteed receivables, ensuring assignment to guarantors per 2021 rules; validate against CRR connected client principles.[ECB Press Release]
- Enhance Internal Controls: Implement robust governance to prevent "serious negligence," including automated checks, independent validation, and training on counterparty identification.[ECB Press Release]
- Conduct Gap Analysis: Test large exposure reporting for the past 4 years; remediate any breaches within EBA timelines (e.g., return to compliance promptly).
- Monitor and Report: Establish real-time monitoring for exposures >10% capital; notify ECB of breaches immediately with remediation plans.[ECB Press Release]
- Penalty Challenge Option: Affected firms may appeal to the Court of Justice of the European Union within standard timelines (typically 2 months).[ECB Press Release]
Key Dates
Regulatory change introduced prohibiting debtor assignment for guaranteed receivables; .[ECB Press Release]
Period of breaches by Nordea Finance Finland Ltd; .[ECB Press Release]
ECB announces €2.26 million penalty; .[ECB Press Release]
Compliance Impact
Urgency: High – This recent ECB enforcement (announced yesterday) demonstrates aggressive penalty application for prolonged breaches, with €2.26 million for "severe" violations signaling heightened scrutiny on large exposures amid ongoing CRR/CRD VI alignment. Firms risk similar fines, reputational damage, and supervisory escalation if controls fail, especially with ECB's 2026-2028 priorities emphasizing risk management. Immediate reviews are essential to mitigate exposure in a regime designed as a prudential backstop.
AI-generated analysis. May contain errors or omissions — verify with the
original ECB source
before acting. Full disclaimer.
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ESMA consults on post-trade risk reduction services under EMIR 3 26 February 2026 Post Trading The European Securities and Markets Authority (ESMA), the EU’s financial markets regulator and supervisor, has launched a consultation on the requirements for how post-trade risk reduction (PTRR) services can benefit from the conditioned exemption from the clearing obligation introduced under the European Market Infrastructure Regulation (EMIR 3). ESMA is seeking feedback on several elements of the ...
ESMA has launched a consultation on draft Regulatory Technical Standards (RTS) that establish requirements for **post-trade risk reduction (PTRR) services** to qualify for a conditioned exemption from the mandatory clearing obligation under EMIR 3. This framework is critical because it balances market efficiency gains from risk reduction tools against systemic risk concerns, requiring compliance professionals to understand new operational, transparency, and monitoring requirements before the standards take effect.
What Changed
- The draft RTS introduce a structured framework governing how PTRR services operate under the clearing obligation exemption:
Eligible Service Types
The standards focus on three primary PTRR service...
- Market risk neutrality in PTRR exercises—transactions must not alter the overall market risk profile of portfolios
- Required risk reduction in submitted portfolios—genuine risk mitigation rather than speculative activity
- Compliance with pre-agreed rules and reasonable, transparent, non-discriminatory conduct
Operational & Governance Framework
The RTS establish requirements across multiple dimensions:
- Transparency towards participants in PTRR exercises
Suggested Considerations
- *For PTRR Service Providers:
- *Assess current operations against proposed RTS requirements, particularly regarding market risk neutrality and risk reduction thresholds
- *Review algorithm safeguards and execution protocols to ensure compliance with transparency and non-discrimination standards
- *Establish record-keeping systems capable of documenting PTRR exercises and demonstrating exemption qualification
- *Prepare monitoring capabilities to support NCA oversight and supervisory reporting
Key Dates
- ESMA launches consultation
- ESMA considers feedback received and prepares final report
- Deadline for stakeholder feedback submissions
- Draft RTS submitted to the European Commission
Compliance Impact
Urgency: HIGH
AI-generated analysis. May contain errors or omissions — verify with the
original ESMA source
before acting. Full disclaimer.
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The EBA and ESMA consult on revised suitability assessment requirements for banks and investment firms 25 February 2026 Investor protection The European Banking Authority (EBA) and the European Securities and Markets Authority (ESMA) today launched a consultation on the revised joint guidelines on the assessment of the suitability of members of the management body and key function holders . The revised guidelines form part of a broader package designed to harmonise suitability assessments and...
The EBA and ESMA have launched a consultation on revised joint guidelines updating suitability assessments for management body members and key function holders in banks and investment firms, incorporating new requirements from the revised CRD and MiFID II to enhance harmonization and supervisory convergence. This matters for compliance professionals as it introduces mandatory assessments for additional roles, strengthens AML/CFT links, and includes simplifications to reduce burdens, potentially impacting governance processes once finalized and replacing the 2021 guidelines.
What Changed
- - Incorporation of revised CRD requirements for large institutions, including ex-ante applications where authorities perform ex-post assessments, and mandatory suitability assessments for key roles...
- Expanded application to CRD-covered entities and MiFID II investment firms, with further specifications for third-country branches.
- Strengthened integration with AML/CFT framework, providing guidance on identifying reasonable grounds to suspect money laundering or terrorist financing risks during assessments.
- Introduction of targeted simplifications to streamline processes, reduce administrative burdens, and offer greater flexibility/clarity for institutions and supervisors.
- Parallel EBA consultation on RTS specifying standardized documentation (e.g., suitability questionnaires, CVs, internal assessments) for large institutions to ensure consistent submissions.
Suggested Considerations
- Assess current suitability processes against new requirements (e.g., ex-ante applications, AML/CFT checks, third-country branch specs) and prepare for mandatory assessments of additional roles like CFOs.
- For large institutions, evaluate EBA RTS on documentation and align internal templates (e.g., suitability questionnaires, CVs).
- Participate in public hearings on 15 April 2026 if relevant.
- Plan governance updates, including ongoing monitoring of collective/individual suitability and corrective measures.
Key Dates
15:30; - Public hearing on joint guidelines
16:30; - Public hearing on EBA RTS
- Deadline for submitting comments on joint guidelines and EBA RTS
25 May 2026; - EBA publishes all contributions (unless requested otherwise)
consultation); - Revised guidelines enter into force, repealing 2021 guidelines
Compliance Impact
Urgency: High - As a consultation launched today (25 February 2026), firms have ~3 months to engage, but final guidelines will repeal existing ones, mandating process updates for core governance/AML functions in banks and investment firms; delays risk non-compliance with harmonized EU standards, especially for large institutions facing RTS on documentation. Matters due to expanded scope (e.g., CFOs, third-country branches) and AML ties, amplifying fit-and-proper regime enforcement amid supervisory convergence push.
AI-generated analysis. May contain errors or omissions — verify with the
original ESMA source
before acting. Full disclaimer.
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ESMA sets out clearing thresholds under EMIR 3 25 February 2026 Post Trading The European Securities and Markets Authority (ESMA), the EU’s financial markets regulator and supervisor, has published its draft Regulatory Technical Standards (RTS) setting out new and revised clearing thresholds (CTs) under EMIR 3. The proposed thresholds ensure continuity in the coverage of systemic risk in over‑the‑counter (OTC) derivative markets while avoiding unnecessary complexity and additional compliance ...
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ESMA consults on guarantees as CCP collateral and on certain aspects of CCP investment policy 23 February 2026 CCP The European Securities and Markets Authority (ESMA), the EU’s financial markets regulator and supervisor, has launched a public consultation following the review of the European Market Infrastructure Regulation (EMIR 3). ESMA is encouraging all interested stakeholders, including non-financial counterparties (NFCs), to share their views about: the relevant conditions under which ...
ESMA has launched a public consultation under EMIR 3 to gather stakeholder input on conditions for CCPs accepting public guarantees, public bank guarantees, and commercial bank guarantees as collateral, eligibility of debt instruments for CCP investment policies, and secured arrangements for emission allowances as margins or default fund contributions. This matters because it permanently broadens eligible collateral types and extends access to NFC clients, enhancing EU CCP efficiency, competitiveness, and accessibility amid liquidity pressures in energy and other markets.
What Changed
- - Permanent expansion of eligible CCP collateral to include public guarantees, public bank guarantees, and commercial bank guarantees, with specified conditions for acceptance.
- Criteria for deeming debt instruments as eligible financial instruments under CCP investment policies.
- Requirements for highly secured arrangements to deposit emission allowances as margins or default fund contributions.
These build on EMIR 3's measures to broaden collateral scope and entity coverage,...
Suggested Considerations
- Review and Respond to Consultation: CCPs, clearing members, NFCs, and clients should analyze the paper, prepare responses to Annex 1 questions by 30 April 2026, and submit online; indicate confidentiality if needed.
- Assess Internal Policies: CCPs must evaluate current collateral, investment, and emission allowance frameworks against proposed conditions; clearing members/NFCs should model impacts on liquidity and margin posting.
- Monitor Developments: Track ESMA's final report and RTS submission; prepare for potential supervisory expectations on guarantee acceptance and debt instrument eligibility post-2026.
- Engage with Industry: Join associations like EACH for coordinated feedback on risk-based approaches and proportionality.
Key Dates
- ESMA to submit final draft technical standards to the European Commission following final report preparation
- Consultation response deadline; submit online via ESMA portal, addressing specific questions with rationale
Compliance Impact
Urgency: High - Firms face a tight 2-month window (from 23 February 2026) to influence final RTS, with implementation likely in 2027+ affecting core clearing operations; delays risk non-compliance with broadened collateral rules amid ongoing liquidity strains, especially for NFCs in volatile markets like energy.
AI-generated analysis. May contain errors or omissions — verify with the
original ESMA source
before acting. Full disclaimer.
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ESMA publishes a supervisory briefing on the AAR representativeness obligation 20 February 2026 CCP The European Securities and Markets Authority (ESMA), the EU’s financial markets regulator and supervisor, has published a supervisory briefing on the representativeness obligation linked to the active account requirement (AAR). The briefing sets out ESMA’s supervisory expectations for how counterparties should comply with and report on the AAR representativeness obligation. It provides guidanc...
ESMA has published supervisory guidance clarifying how counterparties must comply with the **representativeness obligation** under the Active Account Requirement (AAR), a key component of EMIR 3 that mandates EU counterparties maintain active accounts at EU central counterparties (CCPs) and clear representative volumes of derivatives trades. This briefing is critical because market participants and regulators have held conflicting interpretations of the representativeness requirement, creating compliance uncertainty that this guidance now resolves.
What Changed
The supervisory briefing addresses three core compliance areas:
Identifying Most Relevant Subcategories: Counterparties must continuously identify the five most relevant subcategories for each class of derivatives over each reference period, based on their trading activity. The guidance clarifies that the number of subcategories to select equals the maximum number available for that derivative class.
Representativeness Compliance Standard: Counterparties must clear, on an annual average basis, at least five trades in each of the most relevant subcategories per class of derivative contracts...
Suggested Considerations
- *Immediate (by 26 February 2026):
- Review the ESMA supervisory briefing and Commission Delegated Regulation (EU) 2026/305 in detail
- Assess whether your firm meets the €6 billion notional clearing volume outstanding threshold triggering AAR obligations
- Identify internal teams responsible for AAR compliance (trading, operations, compliance, reporting)
- *Short-term (by 31 July 2026):
Key Dates
- AAR RTS enter into force (20 days after Official Journal publication on 6 February 2026)
- First EMIR 3 representativeness reporting deadline
- First AAR compliance report due
Compliance Impact
Urgency: HIGH
AI-generated analysis. May contain errors or omissions — verify with the
original ESMA source
before acting. Full disclaimer.
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The ECB imposed €12.18 million in penalties on J.P. Morgan SE on 19 February 2026 for misreporting risk-weighted assets (RWAs) from 2019-2024 due to misclassification of corporate exposures (15 quarters) and improper exclusion of transactions in credit valuation adjustment (CVA) risk calculations (21 quarters), both attributed to serious negligence and internal control failures. This enforcement action underscores the ECB's focus on accurate prudential reporting, as underreported RWAs led to overstated capital ratios, distorting supervisory oversight of the bank's risk profile and capital adequacy. Compliance teams must prioritize RWA calculation integrity to avoid similar "severe" and "moderately severe" sanctions under the ECB's penalty guide.
What Changed
This is an enforcement action, not a new rule change, but it reinforces existing requirements under the Capital Requirements Regulation (CRR) for accurate RWA calculations, including proper classification of corporate exposures for credit risk and inclusion of all relevant transactions in CVA risk (which measures counterparty default risk in derivatives). The ECB applied its Guide to the method of setting administrative pecuniary penalties, categorizing breaches as "severe" (credit risk) and "moderately severe" (CVA risk), based on duration, negligence, and impact on supervisory transparency.
Suggested Considerations
- Conduct immediate RWA process reviews: Audit corporate exposure classifications and CVA calculations for misreporting risks, ensuring compliance with CRR risk weights.
- Strengthen internal controls: Implement robust validation mechanisms to detect errors timely, addressing "serious negligence" gaps highlighted by ECB.
- Enhance reporting accuracy: Recalibrate models and data inputs for quarterly ECB submissions; test for overstatement of capital ratios via underreported RWAs.
- Monitor ECB sanctions page (https://www.bankingsupervision.europa.eu/banking/supervisory-sanctions/html/index.en.html) for updates and self-assess against penalty guide severity categories.
- J.P. Morgan specifically: Pay €12.18 million and consider legal challenge under Article 263 TFEU.
Key Dates
2024; - Period of breaches: 15 quarters of corporate exposure misclassification and 21 quarters of CVA transaction exclusions
- ECB publishes decision imposing €12.18 million penalties on J.P. Morgan SE
- Deadline for J.P. Morgan to challenge the decision before the Court of Justice of the European Union (typically 2 months from notification)
Compliance Impact
Urgency: High – This recent (published yesterday) ECB action against a major global bank signals intensified enforcement on RWA reporting, with penalties scaling by breach severity and duration; firms with derivatives or corporate lending books face elevated remediation pressure to prevent distorted capital views and fines up to "extremely severe" levels. It matters because RWAs directly underpin capital requirements, and control failures erode supervisory trust, potentially triggering broader SSM investigations.
AI-generated analysis. May contain errors or omissions — verify with the
original ECB source
before acting. Full disclaimer.
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Upcoming changes to the Euribor Panel 18 February 2026 Benchmarks The European Securities and Markets Authority (ESMA), the EU’s financial markets regulator and supervisor, is issuing a statement on the upcoming changes to the Euribor panel, in its capacity as supervisor of the European Money Market Institute (EMMI), administrator of Euribor. This statement concerns the announcement by EMMI that Barclays Bank PLC (BBPLC), based in the United Kingdom, will withdraw from the Euribor panel. The ...
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The ECB imposed a €7.55 million periodic penalty payment on Crédit Agricole for failing to complete a climate-related and environmental (C&E) risk materiality assessment by the May 31, 2024 deadline, marking the second enforcement action in the ECB's escalating shift from guidance to active enforcement on climate risk supervision. This enforcement demonstrates that the ECB is moving beyond symbolic warnings to substantial financial penalties, signaling that banks must treat climate risk identification and assessment as mandatory compliance obligations rather than discretionary best practices.
What Changed
The ECB's enforcement action reflects several critical regulatory developments:
Mandatory Climate Risk Materiality Assessment
Banks must now conduct comprehensive materiality assessments of climate-related and environmental risks as a binding supervisory requirement, not a guidance recommendation. The assessment must identify all material C&E risks to which the institution is or might be exposed.
Binding Supervisory Decisions with Enforcement Teeth
The ECB has transitioned from non-binding guidance (2020) to legally binding decisions with accruing daily penalties for non-compliance.
Suggested Considerations
- *Immediate (Q1 2026):
- related and environmental risks, documenting exposure across the portfolio
- *Near-term (H1 2026):
- related risks into existing credit risk, operational risk, and market risk frameworks
- testing purposes
Key Dates
- ECB published non-binding Guide on climate-related and environmental risks
- ECB conducted economy-wide climate stress test covering 1,600 eurozone banks
- ECB published guidance on climate stress testing; all significant institutions received feedback letters with staggered timelines
- ECB issued binding supervisory decisions to 28 banks with specific compliance deadlines
- ECB decision requiring Crédit Agricole to conduct C&E risk materiality assessment
Compliance Impact
Urgency: CRITICAL
AI-generated analysis. May contain errors or omissions — verify with the
original ECB source
before acting. Full disclaimer.
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ESMA signs Memorandum of Understanding with the Reserve Bank of India 27 January 2026 CCP International cooperation The European Securities and Markets Authority (ESMA), the EU’s financial markets regulator and supervisor, has signed a Memorandum of Understanding (MoU) with the Reserve Bank of India (RBI) to facilitate cooperation and exchange of information for the recognition of central counterparties (CCPs) established in India and supervised by RBI. This agreement marks a significant step...
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Principles for risk-based supervision: a critical pillar for ESMA’s simplification and burden reduction efforts 09 January 2026 Supervision The European Securities and Markets Authority (ESMA), the EU’s financial markets regulator and supervisor, published today its principles for risk-based supervision . These principles support a common and effective EU-wide supervisory culture and strengthen the EU single market. The principles on risk-based supervision outline key concepts and foundationa...
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ESAs publish joint Guidelines on ESG stress testing 08 January 2026 Guidelines and Technical standards Joint Committee The European Supervisory Authorities (EBA, EIOPA and ESMA - the ESAs) published today their Joint Guidelines on environmental, social, and governance (ESG) stress testing . These Guidelines provide national insurance and banking supervisors with clear guidance on how to integrate ESG risks into supervisory stress tests, both when using established frameworks and when conducti...
The European Supervisory Authorities (ESAs)—EBA, EIOPA, and ESMA—published final Joint Guidelines on 8 January 2026 to standardize how national competent authorities (NCAs) integrate ESG risks into supervisory stress testing frameworks for banking and insurance sectors, without mandating new ESG-specific tests. These guidelines promote consistency, long-term methodologies, and common standards across the EU, initially prioritizing climate and environmental risks (physical and transition) before expanding to social and governance factors. They matter for compliance professionals as they shape future supervisory expectations, enhancing resilience assessments and aligning with CRD (Article 100(4)) and Solvency II (Article 304c(3)) mandates, potentially influencing firm-level stress testing preparations.
What Changed
- - Standardized Integration of ESG Risks: NCAs must embed ESG risks into existing supervisory stress tests or ad-hoc assessments, using a risk-based materiality assessment to scope relevant risks,...
- Methodological and Governance Guidance: Outlines design for ESG-inclusive tests, including objectives (e.g., capital/liquidity robustness, strategy resilience), scenario analysis, and organizational...
- No New Obligations: Does not require NCAs to conduct dedicated ESG stress tests, but ensures consistency when they do, improving legal certainty and transparency in approval processes.
- Phased Approach: Initial focus on climate/environmental risks, with gradual extension to full ESG coverage based on data and model maturity.
Suggested Considerations
- For NCAs: Review and integrate ESG risks into stress testing frameworks via materiality assessments; define objectives, scenarios, and governance; notify ESAs of compliance post-translation; maintain risk-based, phased approach.
- For Firms: No direct mandates, but prepare by enhancing internal ESG risk modeling, data collection (especially climate/physical/transition risks), and stress testing capabilities to align with supervisory expectations; conduct voluntary ESG scenario analyses.
- General: Monitor NCA implementations, update policies for ESG risk integration in ICAAP/ORSA, and engage in industry feedback on data/methodological gaps.
Key Dates
Publication of Final Report and Joint Guidelines by ESAs
Statutory deadline for ESAs to publish guidelines per CRD Article 100(4) and Solvency II Article 304c(3)
NCAs notify respective ESAs of compliance or intent to comply
Application date of Joint Guidelines for NCAs
Compliance Impact
Urgency: Medium. While not imposing immediate firm-level requirements, the guidelines signal escalating supervisory focus on ESG risks from 2027, with potential for more frequent/punitive stress tests; firms delaying ESG integration risk capital/liquidity shortfalls in exercises, amplified by improving data availability and EU sustainability push (e.g., CSRD, SFDR). Proactive preparation mitigates future remediation costs and supports strategic resilience.
AI-generated analysis. May contain errors or omissions — verify with the
original ESMA source
before acting. Full disclaimer.
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