EVALUATION ROADMAP

Roadmaps aim to inform citizens and stakeholders about the Commission's work to allow them to provide feedback and to participate effectively in future consultation activities. Citizens and stakeholders are in particular invited to provide views on the Commission's understanding of the problem and possible solutions and to share any relevant information that they may have.

Title of the evaluation

Fitness check of supervisory reporting requirements

Lead DG – responsible unit

DG FISMA, B2/C2

Indicative Planning

(planned start date and completion date)

Q4 2017 – Q4 2018

Additional Information

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The Roadmap is provided for information purposes only. It does not prejudge the final decision of the Commission on whether this initiative will be pursued or on its final content. All elements of the initiative described by the document, including its timing, are subject to change.

A. Context, purpose and scope of the evaluation

Context

In order to allow the relevant national and EU authorities to monitor financial markets for the purpose of ensuring financial stability, investor protection, and market integrity, entities active in financial markets are required to report a wide variety of data on their financial condition and their activities to these authorities or to bodies specially created for collecting and storing such data. EU law in this area consists of a large number of legislative acts covering a range of financial sector industries (banking, insurance, pension funds, etc.) and products (loans, securities, financial derivatives, etc.). While the need to report to supervisory authorities is broadly acknowledged by stakeholders as being necessary, feedback from them – including from supervisory authorities – received during the Call for Evidence exercise, various sectoral reviews, and in day-to-day contacts has shown that supervisory reporting requirements in their current form may contain a number of shortcomings. According to the stakeholders, the supervisory reporting requirements contained in those acts are not fully aligned, occasionally overlap or are inconsistent with one another. This makes reporting unnecessarily complex, costly, and burdensome, and has a negative impact on the quality of data, making it difficult for the supervisory authorities to understand how financial risk evolves in the financial system – and therefore to fulfil their mandates. In September 2015 the Commission launched a 'Call for Evidence' (CfE) to gauge the cumulative impact and interaction of all the current EU rules governing the financial sector on the basis of specific qualitative data. The area of reporting requirements was one of the most widely raised issues. Similar feedback was received in a number of sectoral legislative reviews carried out around the same time. The Communication on the planned follow-up to the CfE from November 2016 therefore identified the need for a review of financial reporting requirements. This was supported by the REFIT Platform, which called for streamlining reporting requirements to reduce the burden on financial institutions.

Since that time, a number of initiatives have been taken by the Commission which should have the impact of reducing the burden of supervisory reporting requirements (e.g. recent proposal for a review of EMIR, adopted by the Commission on 4 May 2017, as well as the ESAs review, adopted by the Commission on 20 September 2017). However, these were mainly focused on sector specific reporting requirements. This Fitness Check aims to assess whether supervisory reporting requirements are fit for purpose also from a cross-sectoral point of view.

Purpose and scope

The Commission is carrying out a fitness check of the EU reporting requirements in the financial sector in order to analyse the shortfalls associated with supervisory reporting. In particular, the assessment is looking at whether the requirements are meeting their objectives (effectiveness, relevance, EU added value), whether the different reporting frameworks are consistent with one another (coherence), and whether the cost and burden of the reporting obligations is reasonable and proportionate (efficiency). The results of the assessment will identify potential areas where compliance cost and burden stemming from the reporting obligations could be reduced (for example by streamlining and simplifying them) without compromising the financial stability, market integrity, and consumer protection objectives of these obligations.

The assessment is taking a horizontal approach, i.e. it is looking at several pieces of legislation in conjunction. This is a necessity since different legislative acts take a very different approach to supervisory reporting of what can on occasion be similar or even the same type of data. Specifically, current legislation and the reporting obligations enshrined therein is either sector-specific or – usually more recently – product-specific (i.e. rules apply whenever a certain type of financial instrument is being traded or held). Whereas the sector-specific approach frequently requires certain indicators to be computed by the reporting institution for the very purpose of reporting them, the product-specific approach tends to require data to be reported at the level of individual data elements. Still other reporting frameworks require the reporting of non-structured qualitative information. In order to be able to correctly assess the reporting requirements against the above-mentioned criteria, an approach at both legislation level and data element level is necessary. However, due to the significant number of legislative acts and corresponding reporting requirements involved, the present assessment will focus on those legislative acts which contain requirements to report, for supervisory purposes, data in a structured format. The assessment is limited to primary (Level 1) legislation, with a more in-depth look at certain specific products (e.g. derivatives) where a more granular approach to reporting is used.

The assessment is being conducted in parallel with the Financial Data Standardisation (FDS) project, which aims to (1) map all existing supervisory reporting requirements down to the data element level with the aim of identifying overlaps and inconsistencies and; (2) explore ways in which innovative technology and harmonised data definitions (a 'common financial data language') could be used to optimise supervisory reporting requirements without compromising their objectives. The results both interim and final of the first phase of the FDS project (point 1 above) will therefore directly feed into this assessment of the reporting requirements as they become available.

B. Better regulation

Consultation of citizens and stakeholders

While the Call for Evidence and various sectoral legislation reviews have already provided important information, in order to gather more detailed and specific (where possible quantitative) data, the fitness check will include a new public consultation. The consultation will aim to gather more specific feedback from financial institutions, companies, regulatory and supervisory bodies, as well as any other relevant stakeholders on whether the existing reporting requirements reflect their needs and limitations, what specific problems they face with fulfilling the requirements, and what additional costs any such problems may impose on them.

The open public consultation is expected to be launched in 4th quarter of 2017 and will last for a period of 12 weeks. It will be available in the three working languages of the EU (English, French, and German), and respondents will be able to provide their contributions in any of those languages. Stakeholders will be able to access the consultation via the Commission's central public consultations page.

In addition to the open public consultation, a Stakeholder Roundtable on financial reporting is being set up. This group will primarily be formed by experts from EU supervisory and regulatory bodies, but may later also include national authorities and industry stakeholders with relevant experience in this field. It will be an informal group of experts with participants invited on an ad hoc, as needed basis, and it is expected to provide valuable practical knowledge and experience in the area of financial reporting.

Data collection and methodology

The fitness check will incorporate feedback and data mainly, but not exclusively, from the following sources:

The public consultation mentioned to be held as part of the assessment.

The Call for Evidence exercise, the results of which are summarised in a Commission Communication of 23 November 2016 (COM(2016) 855 final) 1 .

The review of the European Markets Infrastructure Regulation (EMIR), the results of which were published in a Commission Report of 23 November 2016 (COM(2016) 857 final) 2 .

Any other public consultations or reviews of relevant legislative acts in the financial sector.

The Financial Data Standardisation Project, which is already generating further information on the level of overlaps and inconsistencies between the various reporting frameworks.

The methodology to be used to quantify regulatory costs will draw from a 2009 study on the cost s of compliance with reporting requirements  carried out by an external contractor, as well as a new follow-up study which will aim to establish a detailed dataset on compliance cost in the area of supervisory reporting.