Explanatory Memorandum to COM(2021)724 - Amendment of certain Directives as regards the establishment and functioning of the European single access point

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dossier COM(2021)724 - Amendment of certain Directives as regards the establishment and functioning of the European single access point.
source COM(2021)724 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 published by entities that is relevant to capital markets, financial services and sustainable finance, i.e. mainly information about their economic activities and products. 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;

·a proposal for a Directive amending certain Directives (this proposal); and

·a proposal for a Regulation amending certain Regulations.

Amendments to certain Directives are necessary to achieve the above objectives to contribute to the integration of the single market, particularly as regards the collection of information to be made available to 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.

This proposal does not create any new reporting obligation in terms of content, but builds on existing disclosure requirements foreseen in the EU legal acts amended by this proposal.

• Consistency with other Union policies

This proposal contributes to the implementation of the European strategy for data set-out in a Commission Communication of February 2020 2 by enabling the availability of relevant information in a financial common European data space. ESAP is part of the European financial data spaces presented in the strategy.

In its Strategy for Financing the Transition to a Sustainable Economy 3 , 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.

In addition, this proposal contributes to the achievement of the objectives of the European Green Deal 4 and the Strategy for Financing the Transition to a Sustainable Economy by addressing the availability and usability of information about the sustainability of European entities’ activities.

2. LEGAL BASIS, SUBSIDIARITY AND PROPORTIONALITY

• Legal basis

The proposal’s legal basis rests on Articles 50, 53, 62 and 114 of the Treaty on the Functioning of the European Union (TFEU). Article 50 of the TFEU is the legal basis for adopting EU measures aimed at attaining the right of establishment in the single market in company law. Article 50 of the TFEU mandates the European Parliament and the Council to act by means of directives. In addition, Article 114 of the TFEU is a general legal act with the objective of establishing or ensuring the functioning of the single market – in this case, the free movement of capital.

• 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. The resulting geographical and thematic fragmentation of disclosure mechanisms and formats is pervasive in the Union and 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.

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

An Omnibus Directive is considered to be the most appropriate legal instrument to amend existing directives to establish ESAP since most of the provisions therein are specifying which public information should be submitted to ESAP via a collection body.

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 5 . 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 accompanying the proposal for a Regulation establishing ESAP 6 . Consultation activities 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 7 .

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 mean or channel.

• 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)” 8 ;

·“Impact Assessment study on the list of High Value Datasets to be made available by the Member States under the Open Data Directive” 9 ;

·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 and to increase the digital use (and re-use) of such information. The possible policy options that are relevant for this proposal relate to the following dimensions: i 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. 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) timeliness of information accessibility via ESAP; (ii) ensuring data integrity and credibility of the source; (iii) grand fathering; (iv) retention period; (v) principles about “voluntary information” which will be accessible via ESAP.

• Regulatory fitness and simplification

This proposal addresses mainly the designation of collection bodies needed 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 Union law or another legal basis pursuant to Regulation (EU) 2016/679 10 , as this proposal does not introduce new data reporting requirements in addition to those that already exist.

4. BUDGETARY IMPLICATIONS

This proposal addresses mainly the entities filing information and the collection bodies.

In order to optimally achieve the objectives of this initiative, this proposal holds no additional implications in terms of costs than what is exposed in the Legal Financial Statement and Budgetary implications of the proposal for a Regulation establishing ESAP for national or EU collection bodies (Officially Appointed Mechanisms, National Competent Authorities, European Supervisory Authorities referred to in the context of EU legislation on financial services, capital markets and sustainability).

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 in order to empower the European Banking Authority (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 11 . This proposal also builds on the existing Officially Appointed Mechanisms that currently collect regulated information from issuers of transferable securities listed on EU regulated markets pursuant to the Transparency Directive 12 .

Costs for the filing entities (filing costs) would amount to EUR 800 per year, comprised of the costs for obtaining a legal entity identifier, signing tools, a digital certificate, and potential filing fees charged by the collection bodies (higher bound estimate – the funding of collection bodies’ funding will a national prerogative, and may commonly include public funding). These costs would represent EUR 121.4 million annually for the filing entities altogether.

Budgetary implications of the above on national budgets cannot be predicted with certainty beyond the examination of costs, as this will depend on many factors, including whether a collection body is public or private, their current funding arrangements, etc.

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 National Competent Authorities, 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.

Monitoring certain elements of this proposal, in particular as regards the extent of machine readability of the information, would be a task for ESMA, as per the proposal for a Regulation establishing ESAP.

The proposal for a Regulation establishing a ESAP includes a review clause for the package.

• Detailed explanation of the specific provisions of the proposal

Each Article of this proposal amends a specific Directive among the ones listed in the Annex to the proposal for a Regulation establishing ESAP, by introducing an additional provision regulating the following specific aspects to enable the functioning of ESAP:

Disclosure and format of certain information

This additional provision specifies that any information, document and report made public under EU law by an entity (including issuers of securities, auditors, funds and fund managers, insurance companies, companies, institutions, investment firms, or credit institutions, as applicable), will have to be submitted to the collection body published in a data extractable format or in a machine-readable format, where required under Union law, simultaneously as their publication.

This provision also specifies that any information, document and report that is to be made public, must be accompanied by a qualified electronic seal as defined in Article 3, point (27), of Regulation (EU) No 910/2014 of the European Parliament and of the Council 13 and must include at least the following metadata:

–the name of the entity submitting the information;

–the legal entity identifier;

–the size of the entity;

–the type of information;

–the specific period of time for the information to be made publicly available, where relevant.

3.

The relevant European Supervisory Authority (i.e. ESMA, EBA or EIOPA), based on a cost-benefit analysis, will develop draft implementing technical standards to specify:


–any specific metadata to accompany the information;

–the data structuring of the information;

–the machine-readable format.

The Commission is empowered to adopt those implementing technical standards by means of implementing acts.

Designation of collection bodies

This provision specifies the relevant collection body to which a filing entity should submit the information. Where a collection body is already identified within a directive, it will be specifically designated for the purpose of collecting information for the purpose of ESAP. When no collection body can be identified within a directive for the purpose of ESAP, the task of being collection bodies for the purpose of ESAP is devolved on officially appointed mechanisms established under Directive 2004/109/EC (Transparency Directive).

Application date

The application date specified in each Article determines when a specific Directive and its related disclosure obligations will start falling in the scope of ESAP.