Explanatory Memorandum to COM(2021)723 - European single access point providing centralised access to publicly available information of relevance to financial services, capital markets and sustainability

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dossier COM(2021)723 - European single access point providing centralised access to publicly available information of relevance to financial ...
source COM(2021)723 EN
date 25-11-2021


1. CONTEXT OF THE PROPOSAL

• Reasons for and objectives of the proposal

The establishment of a European Single Access Point (ESAP) by 2024 is a flagship action of the Capital Markets Union (CMU) Action Plan adopted by the European Commission in September 2020 1 . ESAP will contribute to the achievement of the CMU’s objectives by providing EU-wide access to information activities and products of the various categories of entities that are required to disclose such information, which is relevant to capital markets, financial services and sustainable finance. ESAP will provide access to this information in an efficient and non-discriminatory manner.

Information about entities’ activities and products is essential for decision-making by providers of capital. ESAP will contribute to further integrating the financial services and capital markets in the single market, to allocating capital more efficiently across the EU and promoting the development of smaller national capital markets and economies by giving them greater visibility. ESAP will also allow non-listed entities including Small and Medium-sized Enterprises (SMEs) to make available information on a voluntary basis. This will facilitate their access to capital.

Contents

1.

This proposal is part of a package comprised of:


·a proposal for a Regulation establishing a European Single Access Point (this proposal);

·a proposal for a Directive amending certain Directives; and

·a proposal for a Regulation amending certain Regulations.

ESAP is part of the European financial data spaces presented in the Commission’s Digital Finance Strategy published in September 2020 2 . The Digital Finance Strategy sets out the objective that, by 2024, information disclosed to the public pursuant to EU financial services legislation should be disclosed in standardised and machine-readable formats.

ESAP is directed primarily to users such as investors, financial analysts and market intermediaries, e.g. asset managers, advisers or data aggregators. Other types of users — such as civil society, regulators, and other public authorities such as statistical authorities — may also see an interest in accessing information through ESAP.

• Consistency with existing policy provisions in the policy area

This proposal builds on the requirements of existing legislation in the field of financial services, capital markets and sustainable finance. For capital markets to function efficiently, it is essential to have a regular flow of relevant, reliable, complete, timely and comparable company information towards market participants and other stakeholders. ESAP will promote the effectiveness of EU legislation in the area of financial services and capital markets.

This proposal does not create any new reporting obligation in terms of content, but rather builds on existing disclosure requirements set out in the EU legal acts identified in the Annex of the proposal.

ESAP will be built separately from the Business Registers Interconnection System (BRIS) developed in accordance with the Company Law Directive 3 , allowing both systems to pursue their own standards and objectives, based on own respective governance. ESAP will be complementary to BRIS, which provides the public with information on limited liability companies on the European e-Justice Portal 4 . Overlap on data collected for the purposes of BRIS and ESAP will be limited to certain accounting documents (financial statements, audit reports, management reports including corporate sustainability reporting, and country-by-country reporting by extractive industries).

• Consistency with other Union policies

This proposal is consistent with and contributes to the implementation of the European strategy for data set-out in a Commission Communication of February 2020 5 , as the ESAP is part of the financial common European data space announced in that strategy.

In its Strategy for Financing the Transition to a Sustainable Economy 6 , the Commission placed sustainable finance at the heart of the financial system and as a precondition to create an enabling framework for private investments in sustainable projects and activities.

ESAP will contribute to the achievement of the objectives of the Strategy for Financing the Transition to a Sustainable Economy and of the European Green Deal 7 by making easily available and useable information about the sustainability of European entities’ activities. This will also allow public authorities, private stakeholders and civil society to better assess the sustainability of European entities and, more generally, the progress towards the EU’s policy objectives related to sustainable development including the EU’s climate strategy and targets.

Finally, ESAP is supported by the CMU Action Plan adopted in September 2020 8 .

2. LEGAL BASIS, SUBSIDIARITY AND PROPORTIONALITY

• Legal basis

An EU intervention to reduce fragmentation by ways of a single access point would further contribute to integrating the single market by removing obstacles to the circulation of information within the Union. The Treaty on the Functioning of the European Union (TFEU) confers upon the European institutions the competence to lay down appropriate provisions that have as their object the establishment and functioning of the internal market (Article 114 TFEU).

• Subsidiarity (for non-exclusive competence)

The objectives of this initiative cannot be sufficiently achieved by the Member States individually. The Member States have currently certain leeway for the design of rules on mechanisms and formats of corporate reporting obligations set out by the EU legislation, with heavy reliance on national systems. The resulting geographical and thematic fragmentation of disclosure mechanisms and formats increases access and processing costs for users of corporate information. Further individual actions by Member States would not reduce this fragmentation unless they move in the same direction to build a single access point and address a number of barriers, which is unlikely without a coordinated approach.

Enabling better access to information at the EU level, considering the scale and the effects of such a project, is an objective that can be better achieved at Union level. In addition, the design of suitable formats, terms of use, language specifications, etc. necessitates a certain degree of harmonisation at the EU level to enable interoperability and cross border access and use. There is widespread support for such initiative from Member States, the European Parliament, regulators, regional or national market participants, users, civil society, etc. Therefore, the Union may adopt measures in accordance with the principle of subsidiarity as set out in Article 5 of the Treaty on European Union.

• Proportionality

In accordance with the principle of subsidiarity as set out in Article 5 of the Treaty on European Union, this initiative does not go beyond what is necessary in order to achieve the objectives of this initiative. This proposal will not add or modify reporting obligations in terms of content. In order to minimise the burden on entities and national authorities, ESAP builds as much as possible on the existing data reporting channels and infrastructure.

• Choice of the instrument

A Regulation is considered to be the most appropriate legal instrument to establish ESAP since most of the provisions therein are addressed to the European Securities and Markets Authority (ESMA) who will be building and governing the platform, as well as to the collection bodies. ESMA is an independent European Union authority that contributes to safeguarding the stability of the EU's financial system by enhancing the protection of investors and promoting stable and orderly financial markets. In that context, ESMA is given the task of establishing and operating ESAP, as it contributes in particular to ensuring the integrity, transparency, efficiency and orderly functioning of financial markets.

Moreover, a Regulation will eliminate the risk of major divergences between national laws as regards the characteristics of information to be included and made accessible, as well as the tasks to be carried out by the collection bodies.

3. RESULTS OF EX-POST EVALUATIONS, STAKEHOLDER CONSULTATIONS AND IMPACT ASSESSMENTS

• Ex-post evaluations/fitness checks of existing legislation

The impact assessment accompanying this proposal draws on - inter alia - the fitness check of the EU framework for public reporting by entities published by the Commission in April 2021 9 . A key finding of this fitness check is the need to tap the potential of digital tools to improve access to, use and re-use of regulated information disclosed by entities. In particular, the fitness check highlighted the lack of an EU-wide single point of access to regulated information and limited machine readability of information disclosed by entities.

• Stakeholder consultations

The consultation process and its main conclusions on which this proposal is based are summarised in Annex 2 of the Impact Assessment 10 . These included a targeted online consultation, workshops with various categories of relevant stakeholders, and input from relevant expert groups established by the Commission, in particular the High-Level Forum (HLF) on the CMU 11 .

In general, all consulted stakeholder groups welcomed the Commission’s initiative on the ESAP and expressed their support for a phased-in implementation to prioritise and make available the information on ESAP in different phases. Stakeholders also emphasised the importance of using a ‘file once’ principle. Preparers of the information to be reported publicly and SMEs also underlined the need to avoid creating additional administrative burdens, including no new reporting obligations introduced for entities.

The majority of the stakeholders supported a broad scope of information to be included in ESAP covering both financial and sustainability-related information. The vast majority of stakeholders believed that the standardisation of information under a common reporting framework with common schemes and metadata would be useful to address the challenges regarding comparability, reliability, and reusability of information. They also mentioned that the absence of such common standards is one of the main barriers users and society face when they process financial and environment social and governance (ESG)-related information.

Most stakeholders have similar views on the infrastructure dimension and on how ESAP should collect information, and suggest that ESAP should build on the existing national or European reporting channels. In addition, stakeholders called for information to be made available through ESAP at the same time that it is published in any other means or channel.

All stakeholder groups overall support that ESAP should offer free access to information and information should be available without any payment required. Even if the open data/free access model was strongly recommended, there were some stakeholders that supported the idea that issuers (when submitting the information) or those who will use the information could pay some fees (e.g. annual subscription). The benefit ESAP would create for these providers or users could then justify a decision to apply some kind of fees for specific services.

A clear majority of stakeholders expressed a preference for a public model, for example, under the management of ESMA, with the possible involvement of the European Banking Authority (EBA) and the European Insurance and Occupational Pensions Authority (EIOPA).

• Collection and use of expertise

2.

The impact assessment accompanying this proposal also draws on data available from desktop research and in particular from the following studies and expertise:


·Study on the “Regulatory framework analysis for potential integration into the European Electronic Access Point (EEAP)” 12 ;

·Study on the “Governance for a DLT / Blockchain enabled European Electronic Access Point (EEAP)” 13 ;

·“Impact Assessment study on the list of High Value Datasets to be made available by the Member States under the Open Data Directive” 14 ;

·Expertise provided by Business Reporting - Advisory Group (BR-AG), a company contracted specifically to assist the Commission for this initiative.

The material gathered and used to feed the impact assessment was generally factual or otherwise coming from reputable and well-recognised sources that act as benchmarks and reference points for the topic. Input received from stakeholders during the consultation activities was generally treated as opinions, unless of factual nature.

• Impact assessment

The Impact Assessment accompanying this proposal was examined by the Regulatory Scrutiny Board on 22 July 2021. The Board gave a positive opinion providing a few comments, which were addressed by the Commission in the final version of the Impact Assessment (details are provided in Annex 1 thereof).

The Impact Assessment analyses several policy options to achieve the specific objectives of enabling seamless and integrated access to the relevant entities' public information in a way that will increase the circulation of that information within the Union, and to increase the digital use (and re-use) of such information. The policy options were identified based on the following five main dimensions of ESAP: (1) scope of the information accessible via ESAP; (2) format of the information accessible via ESAP; (3) collection of the information accessible via ESAP and interconnection of existing collection points; i open data and; (5) governance. These are the core aspects in terms of addressing the identified problems and they are also the principal determinants of costs.

The following aspects were also assessed, although they are considered to be more technical and less crucial for the achievement of ESAP specific objectives: (i) ESAP functionalities; (ii) timeliness of information accessibility via ESAP; (iii) ensuring data integrity and credibility of the source; (iv) ensuring data quality; (v) addressing language barriers; (vi) removal of certain barriers to access; (vii) file only once principle; (viii) grand fathering; (ix) retention period; (x) principles about “voluntary information” which will be accessible via ESAP.

• Regulatory fitness and simplification

This initiative sets out the rules for the establishment of ESAP. By streamlining disclosure channels, ESAP will bring simplification and improved efficiency mainly on the demand side (users), with reduced search and processing costs, and to some extent to entities in terms of filing obligations.

• Fundamental rights

This proposal respects fundamental rights and observes the principles recognised in particular by the Charter of the Fundamental Rights of the European Union. ESAP will improve access to information that include personal data. This is necessary to promote data-driven innovation in finance, help integrate European capital markets, channel investments into sustainable activities, and bring efficiencies for consumers and businesses. At the same time, ESAP will improve access only to those personal data that have to be processed pursuant to Union law or another legal basis pursuant to Regulation (EU) 2016/679 15 , as this proposal does not introduce new data reporting requirements in addition to those that already exist.

4. BUDGETARY IMPLICATIONS

In order to optimally achieve the objectives of this initiative, this proposal holds implications in terms of costs and administrative burden for ESMA and national and EU collection bodies, in particular the Officially Appointed Mechanisms (OAMs), National Competent Authorities (NCAs), European Supervisory Authorities and their Joint Committee. The exact magnitude and distribution of these costs will depend on the final specifications of the IT infrastructure and magnitude and timing of the related regulatory, governance and monitoring tasks, which partly depend on decisions made after the adoption of this act.

The legislative financial statement linked to this initiative provides a detailed overview of the costs involved for ESMA as regards the governance of ESAP. For ESMA, the initiative will require over time a total of three full-time employees (FTE) to take on the tasks of overseeing and managing the development and operations of this project. The total financial resources necessary for the implementation of the proposal in the 2022-2027 period will be up to EUR 16.5 million, including EUR 2.3 million of administrative costs and up to EUR 14.2 million in operational spending, of which the EU would support EUR 9.6 million under the current Multiannual Financial Framework (2022-2027). Out if this amount, EUR 5 million would be covered by the Digital Europe Programme in the years 2022-23 16 . Over the period 2024-2027, ESMA costs related to the ESAP would amount to EUR 11.5 million. These costs would be funded via the EU budget for up to 40%, representing EUR 4.6 million and National Competent Authorities would be solicited to fund EUR 6.9 million via their contribution to ESMA.

The financing will support costs linked to developing, maintaining, operating and supporting the ancillary functions and duties in relation to ESAP, including carrying out annual monitoring activities.

As regards regulatory activities implied by the ESAP, a number of implementing acts will have to be developed. Their delivery is staged over time by the Regulation. For certain acts, the Regulation mandates the joint Committee of the European Supervisory Authorities (ESMA, EBA and EIOPA) to undertake their development. The EBA and EIOPA would in addition collaborate with ESMA in the conduct of certain tasks in relation to the functioning and monitoring of the ESAP. In performing these tasks, ESMA, EBA and EIOPA respectively will continue to work towards maximising synergies and efficiency gains, and monitor the additional workload and FTE associated with this proposal in the context of their overall tasks.

For the collection bodies, the costs for the interconnection of the EU/national collection bodies with ESAP (mainly based on the development of Application Programming Interfaces) are estimated to be around EUR 50 800 at individual level (one-off), while annual recurring costs would be around EUR 6 500 at individual level. In some cases, there are strong synergies with existing tasks carried or projects already planned by collection bodies, such as the recent proposal to amend the Regulation (EU) No 575/2013 17 in order to empower the EBA to centralise the publication of institutions’ annual, semi-annual and quarterly prudential disclosures. The EBA will act as the collection body for this information in the context of ESAP 18 . This proposal also builds on the existing OAMs that currently collect regulated information from issuers of transferable securities listed on EU regulated markets pursuant to the Transparency Directive 19 .

The Commission provides a tailor-made expertise via Technical Support Initiative (TSI) to help EU Member States design and implement growth-enhancing reforms in a wide range of policy areas. The Commission’s TSI programme can partially fund the technical support for the implementation of ESAP by NCAs, upon their request. Through the TSI programme, the Commission will also provide input on the practical aspects of reforms. This can take the form of strategic or legal advice, studies, training and in-country missions by experts. Funding provided through the TSI is based on annual request rounds.

5. OTHER ELEMENTS

• Implementation plans and monitoring, evaluation and reporting arrangements

This proposal does not require an implementation plan, but includes specific provisions for ESMA to monitor the implementation and effectiveness of ESAP.

This proposal includes a requirement that the Commission reports to the European Parliament and to the Council on the operation and functioning of ESAP no later than 5 years after the entry into force of ESAP Regulation. When evaluating this initiative, the Commission will rely on a public consultation and discussions with the ESMA, the EBA, EIOPA and collection bodies. The evaluation shall be conducted according to the Commission's better regulation guidelines 20 .

• Detailed explanation of the specific provisions of the proposal

Article 1 mandates ESMA to establish, by 31 December 2024, ESAP to provide public access to the information that entities must disclose to the public pursuant to the legislation listed in the Annex of this Regulation, and to additional categories of information, including financial or sustainability-related information that entities decide to include on a voluntary basis in ESAP.

Article 2 sets out the definitions for the purposes of this Regulation.

Article 3 sets out the conditions and requirements pursuant to which entities can, on a voluntary basis, submit information that will be made accessible through ESAP.

Article 4 requires ESMA to maintain an up-to-date list of collection bodies responsible for accepting information disclosed by entities, to publish this list on the ESAP web portal and to notify it to the Commission.

Article 5 sets out the roles and tasks of the collection bodies, including the technical standards they shall apply to validate whether information submitted by entities comply with the specifications required by this Regulation and the accompanying amendments to sectoral legislation. It also lays down the retention period for the information accessible through ESAP, which shall be 10 years unless otherwise specified in the applicable EU legal act from the Annex. The article also includes a specific provision to ensure compliance with legislation on personal data protection.

Article 6 requires ESMA to develop an effective IT security policy for ESAP.

Article 7 sets-out the functionalities of ESAP through which users can access and search for information.

Article 8 stipulates the conditions under which users will have access to the information available on ESAP, which shall normally be free of charge. ESMA may charge fees to users that require very large volumes of data or frequently updated information. However, Union institutions, agencies and bodies, and a range of national bodies and competent authorities shall always have direct and immediate access free of charge to ESAP to enable them to fulfil their respective responsibilities, mandates and obligations.

Article 9 requires ESMA to ensure that the use and re-use of the information accessible on ESAP does not infringe sui generis database rights and is not subject to any conditions for the use and re-use unless certain conditions are met.

Article 10 requires ESMA to perform certain automated validations to verify the compliance of the information it receives from collection bodies with the requirements of this Regulation and applicable sectoral legislation referred to in the Annex.

Article 11 specifies the tasks of ESMA, acting in close cooperation with the EBA and EIOPA, to manage ESAP.

Article 12 lays down requirements that ESMA, in cooperation with EBA and EIOPA, shall implement to monitor the functioning of ESAP, based on certain qualitative and quantitative indicators. It also requires ESMA, in consultation with EBA and EIOPA, to publish an annual report about ESAP. This article also provides for the consultation of ESMA’s Securities and Markets Stakeholder Group about the annual report.

Article 13 stipulates that the Commission shall review the functioning and effectiveness of ESAP 5 years after the entry into force of this Regulation.

Article 14 states that this Regulation shall enter into force on the twentieth day following that of its publication in the Official Journal of the European Union.

In order to establish a sound and efficient ESAP platform which will cover publicly available information about financial services provided in the Union, capital markets of the Union and sustainability, a number of Directives and Regulations in those fields will be amended by an Omnibus Directive and an Omnibus Regulation to add an ESAP stand-alone provision about the format of the information and its submission to a collection body. The scope of the ESAP will need to be built in a proportionate and gradual manner from 2024 to 2026, entailing a transitional scaling-up of the collection and submission of the information on its platform. The outcome of the ESAP targeted consultation has emphasized as a crucial driver that at least ESG information - such as the ones coming from the Taxonomy Regulation – and the information provided by issuers of securities in the scope of the Transparency Directive and the Prospectus Regulation should be accessible on ESAP as soon as it is established. This has been reflected in the proposal of the Commission. In addition, the Commission proposes to also start with the collection and submission on ESAP of pieces of information that - based on sectoral legislation - are already available in a machine-readable format. Machine-readable formats will be extended to additional information depending on future decisions of the Commission through delegated acts on a case-by-case basis.