As part of this , Delano asked nine financial experts about the regulatory topics at the top of their list of priorities for the next 18 months. Here’s what Jean-Pierre Gomez, head of regulatory and public affairs at Société Générale Securities Services Luxembourg, had to say:
“Regulatory compliance is a growing and key strategic priority for all legal departments. And if you think compliance is expensive, try non-compliance.”
“The key EU financial regulatory institutions publish each year their annual work programmes, setting out their priorities for the year ahead. These priorities align with each institution’s broader longer-term ‘strategy.’”
ESG regulation
“One important regulatory topic continues to be ESG to carry on achieving this green transparency, expected since many years by investors, consumers and financial producers interested in green economy, environment, and preservation of the planet.”
“Concerning SFDR [Sustainable Finance Disclosure Regulation], though the European Commission’s consultation closed in December 2023, we should see how far the industry is aligned in terms of implementation of SFDR and what ideas for a new product labelling regime can be put forward in terms of SFDR 2.0. This is the most important feature in this overall consultation as it might be the end of article 8 and 9 in SFDR 2.0.”
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“Another ESG regulation is CSRD: the Corporate Sustainability Reporting Directive. CSRD officially replaced NFRD [Non-Financial Reporting Directive] in January 2024 with two novelties: the principle of double materiality and the carbon assessment. Those new concepts are certainly the major issues companies will have to face. Double materiality consists of identifying both company’s implications on society and impacts of ESG criteria on the company itself. Carbon assessment is a technique for measuring carbon footprints at a given time.”
“But CSRD does not replace SFDR. They are interconnected since CSRD extends reporting obligations of companies to asset managers while SFDR extends reporting obligations of asset managers to investors of their investment funds.”
“CSRD impacts listed companies and companies having more than 250 employees with either €20m balance sheet or €40m in net turnover.”
AIFMD and Dora
“AIFMD 2 [Alternative Investment Fund Managers Directive] comes out in 2024, with the European Parliament having given approval on 7 February 2024. The formalisation of AIFMD 2 is now largely a formality and will initiate a two-year transposition phase. AIFMD 2 introduced new requirements for AIFMs, such as a legal framework for the implementation of two LMT (liquidity management tools), as well as a strong governance for AIFMs, including delegation aspects and AIF loan origination with direct lending.”
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“Certainly, Dora [Digital Operational Resilience Act, whose application is planned for 2025] is another key regulatory step to strengthen the resilience of the EU financial sector. It creates a European regulatory framework on digital operational resilience whereby all companies need to make sure they can withstand, respond and recover from all ICT incidents. In January 2024, the Financial Sector Supervisory Commission (CSSF) in Luxembourg published Circular 24/847 regarding ICT-related incident reporting framework (application 1 April-1 June 2024 depending on the type of supervised entities), which imposes new reporting requirements and procedures.”
Move to T+1
“Even though it is not a regulatory topic, the US move to T+1 to settlement cycle, effective on 28 May 2024, is worth mentioning. There is a current assessment regarding a potential move to T+1 in Europe. This is made in parallel with CSDR refit (the European Securities and Markets Authority’s consultation on the CSDR penalty mechanism closed in February 2024).”
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“All those regulations require substantial preparation and efforts to be compliant on D-day. This adds pressure on costs for Luxembourg banks and/or other professional of the financial sector whether or not they are acting in the fund industry.”
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