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COVID-19

COVID-19

(Updated 21 July) The European Securities and Markets Authority (ESMA), together with National Competent Authorities (NCAs), is closely monitoring the situation in view of the continuing impact of the COVID-19 outbreak on financial markets in the European Union (EU).

Recommendations to financial market participants

ESMA, in its initial statement on the COVID-19 pandemic on 11 March, made the following recommendations to financial market participants:

Business Continuity Planning All financial market participants, including infrastructures should be ready to apply their contingency plans, including deployment of business continuity measures, to ensure operational continuity in line with regulatory obligations;

Market disclosure – issuers should disclose as soon as possible any relevant significant information concerning the impacts of COVID-19 on their fundamentals, prospects or financial situation in accordance with their transparency obligations under the Market Abuse Regulation;

Financial Reporting – issuers should provide transparency on the actual and potential impacts of COVID-19, to the extent possible based on both a qualitative and quantitative assessment on their business activities, financial situation and economic performance in their 2019 year-end financial report if these have not yet been finalised or otherwise in their interim financial reporting disclosures; and

Fund Management – asset managers should continue to apply the requirements on risk management, and react accordingly.

Market Performance and Regulatory Actions

ESMA's view on Financial Markets and Regulatory Action​

Steven Maijoor, Chair of ESMA, in statements published on ESMA's social media channels on 23 March set out ESMA's view on

EU Financial Markets and COVID-19​

  • ESMA’s objective is to maintain markets that are open and orderly as they are vital for the functioning of our economy and financial system, especially in the current circumstances. Open markets allow the process of adjusting prices to new information to continue, and they provide liquidity to the benefit of investors by allowing them to rebalance portfolios and meet contractual obligations. ESMA, in coordination with NCAs, continues to monitor developments in financial markets as a result of the COVID-19 outbreak and is prepared to use its powers to ensure the orderly functioning of EU markets so that they benefit investors and support stability; and

ESMA and its Regulatory Actions in response to COVID-19

  • In response to the COVID-19 outbreak, ESMA has intensified its coordination with NCAs. To help market participants’ business continuity, we have clarified the requirements regarding the recording of telephone conversations, have provided relief regarding a number of deadlines, including that regarding SFTR, and have coordinated the implementation of short selling measures in a number of member states. We will continue this strong cooperation with NCAs to respond to the current exceptional circumstances.

​Risk Assessment

​On 2 April ESMA also updated its risk assessment for the European Union's (EU) financial markets to account for the impact of the COVID-19 pandemic

RISK update 2020

The pandemic, in combination with existing valuation risks, has led to large equity market corrections since mid-February, driven by a sharp deterioration in the outlook for consumers, businesses and of the economic environment. Corporate bond, government bond markets and a number of investment funds show signs of stress. Market infrastructures have continued to function in an orderly manner despite significant surges in trading activity, the use of circuit breakers and increases in derivatives margins.

ESMA sees a prolonged period of risk to institutional and retail investors of market corrections and very high risks across the whole of ESMA’s remit.

This Risk Up-date complements our regular TRV and Risk Dashboard monitoring. The next Risk Dashboard covering the entire 1Q20 will be published according to the regular schedule in May 2020

ESMA Actions

ESMA, along with the NCAs, has taken a number of initiatives to address the effects of the COVID-19 pandemic in the following areas:

Benchmarks Regulation

ESMA issued a statement to promote coordinated action by NCAs regarding the timeliness of fulfilling external audit requirements for interest rate benchmark administrators and contributors to interest rate benchmarks.  

Corporate Disclosure Issues

ESMA has published statements relating to the application of IFRS9, financial reporting deadlines for issuers, Alternative Performance Measures, reflecting the effects of COVID-19 in half-yearly financial statements and accounting for rent concessions:

Credit Rating Agencies Supervision

ESMA, as the single EU direct supervisor of Credit Rating Agencies (CRAs), is continuously engaging with CRAs to assess the impact of COVID-19 on their businesses and operations.

In its engagement, ESMA focuses on business continuity and adherence to key requirements of the CRA Regulation concerning, for example, the proper application of methodologies, conflicts of interest, internal controls, transparency and governance.

In addition, ESMA is closely monitoring CRAs’ rating actions through enhanced data analytics to assess the possible impact of ratings actions on financial stability, this information is shared with NCAs, and other stakeholders. Furthermore, ESMA discusses CRA actions in the context of COVID-19 with regulators around the globe.

Bilateral margining requirements - one year deferral of the implementation phases

The European Supervisory Authorities (EBA, EIOPA and ESMA – ESAs), in response to the COVID-19 outbreak have published joint draft Regulatory Technical Standards (RTS) to amend the Delegated Regulation on the risk mitigation techniques for non-centrally cleared OTC derivatives (bilateral margining), under the European Markets Infrastructure Regulation (EMIR), to incorporate a one-year deferral of the two implementation phases of the bilateral margining requirements.

The European Securities and Markets Authority (ESMA), the EU’s securities markets regulator, has decided, in view of the effects of the ongoing COVID-19 pandemic on stakeholders and market participants, to extend the response date for the consultation on the technical standards on reporting, data quality, data access and registration of Trade Repositories under EMIR REFIT to 3 July 2020.

ESMA issued a public statementto clarify the application of the MiFIR open access provisions (OAP) for trading venues (TVs) and central counterparties (CCPs) in light of the recent adverse developments related to COVID-19. It aims to coordinate the supervisory actions of national competent authorities (NCAs) by setting out the issues they should consider when assessing OAP requests.

Fund Management Periodic Reporting

ESMA has published a statement promoting a coordinated risk-based approach by NCAs to their supervision of fund managers compliance with their periodic reporting obligations:

Short Selling Measures

In the areas of short selling ESMA has taken the following action:

  • On 16 March ESMA has issued a decision temporarily requiring the holders of net short positions in shares traded on a European Union (EU) regulated market to notify the relevant national competent authority (NCA) if the position reaches or exceeds 0.1% of the issued share capital;
  • Lowering the threshold is a precautionary action that is essential for authorities to monitor developments in markets. The measure can support more stringent action if required to ensure the orderly functioning of EU markets to underpin financial stability and investor protection;
  • For the EU financial markets as a whole, while there is some increase in net short selling positions, there is no indication that at this stage short selling is negatively impacting the functioning of markets. However, a number of NCAs have taken action in national markets reflecting particular national conditions and risks to market functioning of short selling. ESMA, with NCAs, will continue to monitor developments in this area and are ready to act, if necessary.
  • On 10 June ESMA renewed its decision on short net positions effective 17 June 2020 for a period of three months.

ESMA has issued positive opinions on short selling measures by the following National Competent Authorities:

List of National Short Selling Measures

National Competent Authority Start Date Expiry Date
CNMV – Spain 17 March 2020 17 April 2020
CONSOB – Italy 18 March 2020 Restriction ended by CONSOB on 18 May. Original date of termination was 18 June 2020
AMF – France 18 March 2020 16 April 2020
FSMA – Belgium 18 March 2020 17 April 2020
HCMC – Greece 18 March 2020 24 April 2020
FMA - Austria 18 March 2020 18 April 2020
FMA - Austria 16 April 2020 18 May 2020
FSMA – Belgium 17 April 2020 18 May 2020
AMF – France 17 April 2020 18 May 2020
CNMV – Spain 18 April 2020 18 May 2020
HCMC – Greece 25 April 2020 18 May 2020

 

Securities Financing Transactions Regulation Backloading

ESMA has issued two statements on coordinated supervisory action on the application of Securities Finance Transactions Regulation (SFTR):

ESMA Timeline

ESMA has made the following announcements related to its COVID-19 work since 11 March:

Date   Announcement Issue
11 March   ESMA recommends action by financial market participants for COVID-19 impact ESMA
16 March   ESMA requires net short position holders to report positions of 0.1% and above Short Selling
17 March   Opinion on CONSOB Short Selling Measures (SSM) Short Selling
17 March   Opinion on CNMV SSM Short Selling
18 March   Opinion on AMF SSM Short Selling
19 March   Opinions on FSMA and HCMC SSMs Short Selling
19 March   ESMA clarifies position on SFTR backloading SFTR
20 March   ESMA extends consultations response dates ESMA
20 March   ESMA clarifies position on call taping under MiFID II MiFID
20 March   ESMA sets out approach on MiFIR tick-size regime for Systematic Internalisers  MiFID
23 March   Steven Maijoor statements on ESMA's social media channels on COVID19 and Markets and Regulatory Actions ESMA
23 March   Opinion on FMA SSM Short Selling
24 March   ESMA issues guidance on accounting implications of COVID-19 Corporate Disclosure
26 March   ESMA clarifies position on SFTR backloading SFTR
27 March   ESMA issues guidance on financial reporting deadlines in light of COVID-19 Corporate Disclosure
27 March   ESMA confirms application date of equity transparency calculations MiFID
31 March   ESMA provides clarifications for best execution reports under MiFID II  MiFID
2 April   ESMA updates its risk assessment in light of the COVID-19 pandemic  Risk
2 April   COVID-19 Update - ESMA continues to operate during the ongoing pandemic ESMA
9 April   ESMA sets out supervisory expectations on publication of investment funds periodic reports Funds
9 April   ESMA extends MiFID II/MiFIR transparency review report consultation to 14 June 2020 MiFID
9 April   ESMA promotes coordinated action regarding benchmarks external audit requirements Benchmarks
9 April   ESMA postpones publication dates for annual non-equity transparency calculations and quarterly SI data MiFID
15 April   ESMA issues positive opinions on short selling bans by Austrian FMA, Belgian FSMA, French AMF, Greek HCMC and Spanish CNMV Short Selling
17 April   ESMA issues new Q&A on alternative performance measures in the context of COVID-19 Corporate Disclosure
4 May   Joint RTS on amendments to the bilateral margin requirements under EMIR in response to the COVID-19 outbreak​ EMIR
6 May   ESMA reminds firms of conduct of business obligations under MiFID II​ Investor Protection
18 May    ESMA – non-renewal and termination of short selling bans by Austrian FMA, Belgian FSMA, French AMF, Greek HCMC, Italian CONSOB and Spanish CNMV Short Selling
20 May   ESMA calls for transparency on COVID-19 effects in half-yearly financial reports Corporate Disclosure
9 June   ESMA extends deadline for responses to consultation on EMIR REFIT​ EMIR
11 June   ESMA renews its Decision requiring net short position holders to report positions of 0.1% and above​ Short Selling
11 June   ESMA publishes statement on MiFIR open access and COVID-19 EMIR
9 July  

ESMA clarifies external support within the meaning of Article 35 of the MMF Regulation

Fund Management
21 July   ESMA recommeds supervisory coordination on accounting for COVID-19-related rent concessions Corporate Disclosure