26.03.2020

Practice Areas: Finance

COVID-19 | New ESMA and ECB measures to mitigate the impact of coronavirus

The European Securities and Markets Authority (ESMA) announced on 19 March that it would be implementing new measures to mitigate the impact of Covid-19 on the European financial markets by postponing reporting obligations for securities financing transactions (SFTs) under Regulation (EU) 2015/2365 of the European Parliament and of the Council of 25 November 2015 and DMIR. Our Financial Law team explains this new measures.

 

In accordance with the current rules, credit institutions, investment companies and entities from relevant third countries are required to submit the first report on 13 April 2020, while central counterparties, central trade depositories and relevant third countries entities must submit their reports on 13 July 2020. Finally, for insurance companies, funds, institutions for occupational retirement provision and relevant third country entities the reporting deadline is 12 October 2020. Non-financial counterparties must report on 11 January 2021.

Taking into account the current challenges these entities are facing, ESMA considers that the competent authorities should not prioritise the supervisory actions concerning the aforementioned mandatory reporting on 13 April 2020 and until 13 July 2020, including transactions carried out in this period. They should rather, generally speaking, supervise compliance with the applicable legislation proportionally.

ESMA informs further that there is no requirement to report to trade depositories by 13 April 2020. This will give these entities time to address the emergency period and prepare themselves for the new reporting arrangements and not be ready to record the details of these operations. Consequently, the counterparties that are obliged to report will not be able to do so on the first reporting day.

On 18 March, the European Central Bank announced an asset purchase programme of private and public sector securities to counter the serious risks posed by the spread of the Covid-19 virus to the monetary policy transmission mechanism and the euro area. This programme shall be 750 billion Euros, purchases will be conducted until at least until the end of 2020 and will include all the asset categories eligible under the existing asset purchase programme. There will be a waiver of the eligibility requirements concerning the amounts issued by the Greek Government under this programme.

 

Furthermore, the European Central Bank (ECB) has decided:


- To expand the range of eligible assets under the corporate sector purchase programme to non-financial commercial paper, making all commercial papers of sufficient credit quality eligible for purchase under the programme;
- To ease the collateral standards by adjusting the main risk parameters of the collateral framework.
The European Central Bank also ensures that it is committed to supporting all citizens of the euro area by ensuring that all sectors of the economy can benefit from supportive financial conditions in order to absorb the shock - which also applies to families, businesses, banks and governments. The ECB concludes by undertaking to explore all options and all contingencies to support the economy through this shock.
The announcement is available in English at https://www.ecb.europa.eu/press/pr/date/2020/html/ecb.pr200318_1~3949d6f266.en.html

 

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