ESMA outlines measures to improve depositary supervision
The European Securities and Markets Authority (ESMA) published a peer review today. This review assessed the supervision of depositaries, focusing on their oversight and safekeeping obligations. ESMA, the EU’s financial markets regulator, aims to enhance depositary supervision. The peer review concluded that foundational frameworks for depositary supervision exist. However, significant differences were noted across jurisdictions.
The European Securities and Markets Authority (ESMA) published a peer review today. This review assessed the supervision of depositaries, focusing on their oversight and safekeeping obligations. ESMA, the EU’s financial markets regulator, aims to enhance depositary supervision.
The peer review concluded that foundational frameworks for depositary supervision exist. However, significant differences were noted across jurisdictions. These divergences concerned the depth and maturity of supervisory approaches. Some National Competent Authorities (NCAs) showed advanced practices, while others needed improvement.
Several transversal findings emerged from the review. Supervisory engagement needs to be more frequent and proportionate to the associated risk. This is crucial given the concentration of depositaries within the assessed markets and their potential systemic significance.
Concerns also arose regarding the depth and intrusiveness of supervisory assessments. This applied to several NCAs concerning depositaries entrusting significant tasks to third parties.
It is important to bear in mind the obligation of depositaries to perform control-related activities autonomously.
The peer review focused on five jurisdictions: Czechia (CNB), Ireland (CBoI), Italy (Bank of Italy), Luxembourg (CSSF), Sweden (SFSA) and examined the supervisory and enforcement practices of these National Competent Authorities (NCAs) across key areas of depositary business activities.
Peer reviews aim to promote consistent and effective supervisory practices across the EU. They also seek high-quality supervisory outcomes and a level playing field among NCAs. This report will aid all NCAs in their depositary supervision. It is especially relevant given the ongoing discussion on the investment management sector's importance to European capital markets.
ESMA will continue promoting further discussion on the supervision of depositaries and will follow up on the recommendations in the report in due course.