In our last piece, we took a tour through the dynamic world of the European Commission’s financial regulation efforts as we head towards the 2024 EU elections. Now, let’s shift gears and dive into what’s actually rolling out in 2024. We’re talking big changes across the board – from Sustainable Finance to Digital Finance and Asset Management. It’s all set to give the EU’s financial landscape a whole new look.
In our last piece, we took a tour through the dynamic world of the European Commission’s financial regulation efforts as we head towards the 2024 EU elections. Now, let’s shift gears and dive into what’s actually rolling out in 2024. We’re talking big changes across the board – from Sustainable Finance to Digital Finance and Asset Management. It’s all set to give the EU’s financial landscape a whole new look.
All about the green scene
CSRD marks a stepping up in the game for European and non-EU companies with significant EU operations. They’ve got to report on environmental and social impacts, syncing up with the SFDR’s demand for financial entities to be transparent about sustainability risks. This kicks in from January 2024.
Next, we’ve got the EU Taxonomy. It’s been around since July 2020, setting the bar for eco-friendly economic activities. Starting January 2024, there’s a new layer to this – financial market participants will need to report annually on how they align with these green criteria.
And don’t forget the EU Green Bond Standard (EU GBS). Approved in late 2023, this one’s all about boosting the green bond market with some savvy guidelines. Look out for its implementation about a year after publication.
Crypto and digital identity inbound
The MiCA regulation (MiCAR) is a major update, officially published in June 2023. It’s set to enforce rules for stablecoins, including asset-referenced and e-money tokens, from 30 June 2024. By this date, we expect the ESMA and the EBA to have their draft Delegated Acts prepared. The rest of the regulation’s provisions are slated to be fully applicable by December 30, 2024.
In preparation for MiCA, the ESMA initiated a second consultation in October 2023, focusing on various aspects like sustainability, disclosure requirements, white paper standards, trade transparency, and guidelines for crypto-asset service providers. The goal is to present a final report and standards to the European Commission by 30 June 2024. This process includes joint consultations with the EBA on standardized assessments.
In October, the EBA began its consultations under MiCAR, addressing supervisory criteria, transactions in non-EU currencies, and recovery plans for asset-referenced tokens (ARTs) and e-money tokens (EMTs). This initiative aims to enhance the oversight and stability of the EU’s crypto-asset market, with feedback being collected until 8 February 2024.
Starting 30 December 2024, the revised Transfer of Funds Regulation (TFR), introduced on 9 June 2023, will be in effect. It brings an important change: extending the Financial Action Task Force’s “travel rule” to Crypto Asset Service Providers (CASPs). This means CASPs will now align with the standards of traditional financial institutions. The key requirement? CASPs must disclose both the sender’s and receiver’s information for fund transfers, covering different types of currency, crypto assets, and electronic money tokens in electronic transfers.
Additionally, in early November, the Spanish Presidency circulated the finalized version of the European Digital Identity Framework regulation (eIDAS2), following endorsement in discussions with the European Parliament and Commission. It is now awaiting approval from the European Parliament and formal endorsement by the EU Council. The publication in the EU’s Official Journal is anticipated in early 2024.
Big moves ahead in the Payments sector
While the big headlines in payments have been taken by PSD3/PSR, 1 January 2024 is also an important date for the industry – it will be the date when the CESOP (Central European System of Payment Information) regulations are kicking in. What this means is that all EU Payment Service Providers (PSPs) will now have to report every cross-border payment transaction. This move is primarily aimed at tackling VAT fraud.
The process is quite straightforward but crucial. These PSPs are required to keep an electronic record of these transactions and then, every quarter, they need to share this data with their national tax authorities. The first of these reports is expected by 30 April 2024.
And there’s a deadline for the Member States as well. They need to have the CESOP Directive incorporated into their national laws by the end of 2023. It’s a significant step towards transparency and combating financial fraud at the EU level.
Asset Management isn’t left behind
Starting 10 January 2024, there’s a significant update to the European investment fund industry with ELTIF 2.0. This is a refresh of the European Long-Term Investment Funds framework, which first came about in 2015. The big news here is that the investment eligibility criteria are being broadened and the rules are being made simpler.
What’s the goal behind this update? It’s all about giving the real economy a boost. By changing the ELTIF regulations, the idea is to make it easier for non-bank capital to flow into long-term projects, especially infrastructure ones, and also to support financing for SMEs (Small and Medium-sized Enterprises).
In essence, ELTIF 2.0 is about opening up more opportunities for investment in crucial sectors and making it less complicated for funds to support these areas. It’s a key move towards strengthening the economic fabric of Europe by facilitating long-term investments.
For Capital Markets
The new European Market Infrastructure Regulation (EMIR Refit) will take effect on 29 April 2024, targeting enhanced transparency, standardisation, and data quality in derivatives transactions.
Amidst the evolving financial landscape post-2008, the ESMA has been vigilantly monitoring systemic risks. The ECB’s need for prompt data from interest and forward rate markets is crucial for gauging inflation trends. Meanwhile, the recent EMIR Refit standards aim to streamline reporting processes and mitigate rising operational costs. It’s a complex scenario, but these measures are pivotal for maintaining market stability and transparency.
On the Prudential Regulation front
The Directive on Credit Servicers and Credit Purchasers, governing the sale, purchase, and servicing of non-performing loans (NPLs) from EU banks, must be transposed by Member States by 29 December 2023 and will become effective on 30 December 2023.
With an eye on sustainability, digital transformation, and enhanced oversight, the EU is setting a new standard for global financial markets. As these regulations roll out, the impact will be felt far beyond the borders of the EU, signaling a new chapter in global finance.