This article contains a summary of recent regulatory developments in the European Union’s investment services sector and capital markets. The European Supervisory Authorities or ESAs have been issuing orders and opinions to the national regulators of the European Union in their efforts to help the financial sector cope with the world crisis.

In its statement, ESMA provides guidance to issuers and auditors regarding the calculation of expected credit losses and requirements to disclose information about them.

The EBA has also issued a related statement on the implications of the pestilence for prudential and accounting matters. The two statements are consistent with each other in respect of financial reporting.

Extensions of financial reporting deadlines

Because issuers are having trouble preparing financial reports and auditors are failing to audit on time, ESMA has issued a public statement in which it implores national regulators to be forbearing towards issuers who need to delay the publication of financial reports beyond their statutory deadlines. The statement also says that issuers should keep their investors informed of any expected delays in publication and that their obligations towards the Market Abuse Regulation still stand.

ESMA also highlighted that financial reporting is an important anchor for the economic decisions of users of financial information, as well as for exercising their rights to vote or otherwise influence management actions. The preparation of periodic information must continue to be carried out in accordance with the applicable financial reporting framework to ensure investor protection and to preserve the integrity and proper functioning of the EU’s financial markets.

EU-wide stress test postponed to 2021

The European Banking Authority has decided to postpone an EU-wide stress test for banks until 2021 as a way of alleviating the immediate burden that banks are bearing during this crisis. It will come up with another timeline in due course.

Business continuity

In another recent public statement, ESMA urged financial market participants to bring their contingency plans, including the deployment of business continuity measures, into action to ensure operational continuity in line with their regulatory obligations. Several national regulators have urged the firms that they supervise to do the same and to review their business continuity and disaster recovery systems. They want each entity to make the necessary changes according to its size, complexity and nature of business.
 
Extensions to various ESMA consultation papers

ESMA has announced that it has decided to extend by four weeks the response dates for all current consultations whose closing dates fall on or after 16 March.
 
Other initiatives by national regulators

The Corona-scourge has pushed everyone with an interest in the markets to change his priorities. To make life easier for firms, several national regulators have extended various reporting deadlines and have temporarily withdrawn other obligations. In an effort to limit the spread of the virus, some of them have unveiled plans to force people to work from home and have also put off such activities as regulatory visits and training courses. They also say that they are gathering data about the financial ramifications of the disease.
 
Extension to 'best execution' reports

In another recent public statement, ESMA acknowledges the difficulties encountered by execution venues and firms in preparing the "general best execution" reports that regulatory technical standards (RTS) 27 and 28 of MiFID II require. In this respect, ESMA wants national regulators to take into account of these circumstances by considering the possibilities that:

• execution venues unable to publish RTS 27 reports (due by 31 March) may only be able to publish them as soon as reasonably practicable after that date but they should put this off no later than the following reporting deadline (i.e. 30 June); and
• firms may only be able to publish RTS 28 reports (due by 30 April) on or before 30 June.

Furthermore, ESMA is encouraging national competent authorities "not to prioritise supervisory action" against execution venues and firms in respect of the deadlines of the aforementioned "general best execution" reports.

* Jonathan Greenstein can be reached at Jonathan.Greenstein@complyport.com