Digital Operational Resilience Act

During the first half of the year, a number of Delegated Regulations have been adopted, accessible on the EU Commission’s website. In addition, at the end of May, the European Supervisory Authorities (the ‘ESAs’) published the templates, technical documents and tools for the dry run exercise on the reporting of registers of information.

Within the local context, the Authority published a Dear CEO Letter at the end of March clearly outlining the expectations in relation to the financial entities’ adherence to the Regulations.  In this regard, credit institutions shall make every effort to ensure an adequate transition towards full compliance with the Regulation.

Markets in Crypto-Assets Regulation (MiCAR)

In June the EBA published several regulatory products under MiCAR, related to:

• governance and remuneration (6 June)
• prudential matters (13 June)
• reporting, liquidity stress testing and supervisory colleges (19 June).

Sustainable Finance

Sustainable Finance Disclosure Regulation (the ‘SFDR’)

On 3 May 2024 the EU Commission published a Report summarising the responses to its September 2023 consultation on the SFDR. The consultation included a series of questions on the possible reform of the SFDR with a particular focus on addressing shortcomings and making it more user friendly. The Report does not indicate any possible future changes, however, it provides a useful insight into the industry's views on SFDR and the future of the EU's sustainable finance regime. The MFSA encourages institutions to look into the industry views as summarised in the Report.

Meanwhile, the ESAs, on 18 June 2024 published a Joint Opinion on the assessment of the SFDR in which they call for a coherent sustainable finance framework that caters for both the green transition and enhanced consumer protection, taking into account the lessons learned from the functioning of the SFDR. The ESAs focus on ways to introduce simple and clear categories for financial products. The simplifications consist of two voluntary product categories, “sustainable” and “transition”, that financial market participants should use to ensure the consumers understand the purpose of the products. The rules for the categories should have a clear objective and criteria to reduce greenwashing risks. The ESAs delivered this Opinion on their own initiative.

Greenwashing Monitoring

In June 2024 the EBA published a Report on Greenwashing Monitoring and Supervision. The Report is the EBA’s response to the EU Commission’s request to provide input on the phenomenon of greenwashing, including its most relevant types and occurrences, risks that greenwashing poses, supervisory practices, as well as gaps and challenges in addressing these risks. It builds on the Progress Report published by the EBA in May 2023 and focuses mostly on the banking sector, while covering investment firms and payment service providers to a more limited extent. The Report also provides recommendations to institutions, supervisors, and policymakers.

The outcome of the quantitative analysis of greenwashing shows a clear increase in this trend across all sectors. As institutions are expanding their offering of sustainable finance products and adapting their business models to meet challenges in relation to the transition towards a more sustainable economy, addressing greenwashing is key to providing confidence to the market and to maintain the trust of investors and consumers. The EBA recommends that institutions take a series of measures at both the entity level and the product level to ensure that sustainability claims are accurate, substantiated, up to date, that they fairly represent the institution’s overall profile or the profile of the product, and presented in an understandable manner.