Global Trustee and Fiduciary Services Bite-Sized Issue 5 2024

Global Trustee and Fiduciary Services Bite-Sized | Issue 5 | 2024 13 QUICK LINKS CYBERSECURITY DIVERSITY DORA ELTIF EMIR FINTECH FSB IOSCO SUSTAINABLE FINANCE/ESG UCITS ASIA EUROPE NETHERLANDS NORTH AMERICA UNITED KINGDOM ESMA’s New Report Sheds Light on Quality and Use of Regulatory Data Across EU On 11 April 2024, the ESMA published the fourth edition of its ‘Report on the Quality and Use of Data’, aiming to provide transparency on how the data collected under different regulations is used systematically by authorities in the EU, and clarifying the actions taken to ensure data quality. ESMA is bringing new developments in this edition such as connecting the dots with the overall ESMA Data strategy and technological evolution, including a greater coverage of datasets, and sharing highly demanded information on data quality indicators. ESMA’s report provides details on how National Competent Authorities (NCA’s), the European Central Bank (ECB), the European Systemic Risk Board (ESRB) and ESMA use the data that is collected through the year from different legislation requirements, including datasets from EMIR, SFTR, MIFIR, AIFMD and MMFR. To understand better how the information was used, ESMA says it collected detailed input from NCAs, ECB and ESRB regarding their use of data in the day-to-day operations, covering a range of use cases frommarket monitoring to supervision, enforcement and policy making. The report presents the results of the data quality actions undertaken in 2023 across various datasets, compilating specific examples where the implementation of engagement frameworks leads to measurable improvements of data quality, while stressing that, in specific areas, data quality issues tend to persist over time. Finally, ESMA says that to increase transparency with external users and to support them in their efforts to enhance the quality of the data reported, the document also brings a new annex presenting the methodology to calculate the data quality indicators on four datasets; as well as a code to performweb-scrapping from the websites of APAs to collect transparency data. Link to Report here ESMA Publishes First Overview of EU Securities Financing Transactions Markets On 9 April 2024, the ESMA published a market report on EU securities financing transactions (SFT) markets 2024, which provides the first comprehensive market-level overview of the EU repo market, based on information reported by market participants. ESMA states that it contributes to its financial stability objective, by monitoring repo market developments and providing key risk metrics for its monitoring framework on securities financing transactions. The main findings of the market report are: • SFT markets overview: The total outstanding exposure of SFTs was EUR9.8tn in September 2023. Repos accounted for EUR6.7tn or 68% of the total, securities lending for EUR2.3tn (23%), buy-sell back for EUR743bn (8%), and margin lending for EUR124bn (1%). • Repo market participants: Banks are the major participants in repo markets with 52% of repo amounts, and are predominantly concentrated in a few EEA jurisdictions, with France as the primary domicile holding 55% of EEA repo borrowing and 53% of EEA repo lending in September 2023. Other main countries include Germany (17% borrowing / 19% lending), Italy (7% borrowing / 5% lending) and Ireland (5% borrowing / 6% lending). • Cross-border linkages: 41% of the repo amounts observed are between EEA counterparties. Links with the UK are strong, with EEA repo borrowing from the UK amounting to 12% of repo amounts, and EEA lending to the UK to 9%. • Clearing & settlement: 61% of repo transactions are uncleared, with 55% processed bilaterally and 6%managed with a third-party. • Repo collateral use: Government bonds are the main collateral employed. The cleared segment predominantly makes use of EEA sovereign bonds (88% of collateral), while the non-cleared segment features slightly more collateral heterogeneity (79% of sovereign bonds as collateral). • Repo haircuts: Since CCPs collect margin at the portfolio level using proprietary risk models, cleared repos often report zero haircuts at the transaction level. This contrasts with higher haircuts in non-cleared transactions, especially when involving a more diverse pool of asset classes. Non-cleared repos backed by government bonds often display no haircut. Link to ESMAMarket Report here