Global Trustee and Fiduciary Services Bite-Sized Issue 2 2024

Global Trustee and Fiduciary Services Bite-Sized | Issue 2 | 2024 12 QUICK LINKS AIFMD ANTI-MONEY LAUNDERING CBDC CRYPTOASSETS CYBERSECURITY FINTECH FSB IOSCO MIFID II/MIFIR OPERATIONAL RESILIENCE SUSTAINABLE FINANCE/ESG ASIA EUROPE LUXEMBOURG NETHERLANDS NORTH AMERICA UNITED KINGDOM The FRC announcement also outlines that the changes aim to deliver on the FRC’s intentions contained within its Policy Statement of November 7 and, in this, the FRC sets out the future direction for its revisions to the Corporate Governance Code following the FRC’s stakeholder consultation on the Code in 2023. The FRC announcement also describes a number of matters (discussed further in the links below), such as: • A prioritised revision to the Code in one significant area being Internal Controls, a main substantive change to Internal Controls (being the new Code expectation for a Board declaration concerning internal controls in its Annual Report) and that it is for the Board to determine what should comprise its material internal controls; and, • Dropped, earlier proposed revisions to the Code (e.g., related to the role of the audit committees on environmental, social and governance issues, expanding diversity and inclusion expectations etc); As regards timing, the FRC describes that in response to stakeholder feedback about the need for Boards to have more time to develop their approaches to Internal Controls, the new Code expectation for the Board declaration will come into effect from 1 January 2026, one year after the rest of the updated Code comes into effect from 1 January 2025. The FRC says that it “considers this approach to Internal Controls, which is principles based and relies on Boards making their own judgments on what is material, is better suited for the UK commercial and governance framework than a more intrusive and prescriptive approach required in other jurisdictions.” The FRC announcement also highlights that a small number of other more minor changes (relating to the Code provisions on malus and clawback and audit committee minimum standards) have been made to the Code that aim to better streamline the expectations or clarify the language. The FRC finishes by stating that the well-established principle of Boards having the flexibility to “Comply or Explain” will remain. The FRC states that it encourages Boards, investors and their advisors to actively support the flexibility within the “Comply or Explain” approach to ensure governance expectations are better tailored to the specific circumstances of each company. Link to the Code here Link to the FRC’s Announcement here The EBA Consults on Guidelines on the Management of ESG Risks On 18 January 2024, the European Banking Authority (EBA) launched a public consultation on draft Guidelines on the management of Environmental, Social and Governance (ESG) risks. The EBA sets out in the draft Guidelines that it is mandated to issue Guidelines on minimum standards and reference methodologies for the identification, measurement, management and monitoring of ESG risks by institutions, and the EBA intends (to ensure the resilience of the business model and risk profile of institutions in the short, medium and long term) that such Guidelines “will set requirements for the internal processes and ESG risks management arrangements that institutions should have in place” . The EBA describes that the Guidelines set out “principles for the development and content of institutions’ plans in accordance with the Capital Requirement Directive (CRD6), with a view to monitoring and adequately addressing the financial risks stemming from ESG factors, including those arising from the adjustment process towards the objective of achieving climate neutrality in the EU by 2050.” The EBA go on to outline that the draft Guidelines were developed in line with the EBA’s roadmap on sustainable finance and as part of the planned EBA actions in accordance with its roadmap on the implementation of the EU banking package. The EBA describes that the Guidelines address the mandate specified in letters a, b and c of Article 87(a)5 of the CRD however letter d of that mandate (referring to the criteria for setting specific climate-related scenarios) will be addressed through a subsequent EBA work. The consultation runs until 18 April 2024.The EBA state that it is planned that the guidelines will be finalised by end-2024 and apply from a date in the future (which is to be determined and depending on the CRD6 application date). Link to the Consultation here