Looking Ahead: European Developments - Horizon Scanner: Finance, March 2025

EUROPEAN COMMISSION'S WORK PROGRAMME AND OMNIBUS SIMPLIFICATION PACKAGES

European Commission Work Programme

The publication of the European Commission's Work Programme 2025 on 12 February 2025 brought welcome clarity on the priority legislative files for the rest of this year, and the timing of key planned proposals. In addition to the Omnibus Simplification Packages discussed below, it also confirmed the following:

• The Commission plans to publish a Communication on a Savings and Investment Union in March 2025 (provisionally 19 March 2025). It launched a related Call for Evidence on the Savings and Investment Union on 3 February 2025 (which lasted for 4 weeks). Its focus areas include supporting retail participation in the capital markets, incentivising EU companies, and removing barriers to cross-border activity.
• As expected, a legislative proposal to amend the EU Securitisation Regulation is planned for Q2 2025, following the Commission's 8-week targeted consultation in Q4 2024. For more information on that consultation, read our earlier briefing: EU Securitisation Regulation: Commission launches 8-week consultation.
• A legislative proposal to amend the Sustainable Finance Disclosures Regulation is planned for Q4 2025. For more information on what that proposal might involve, read our earlier briefing: Sustainability Developments: Possible Omnibus Simplification Package for Reporting; Possible move from SFDR Disclosures to Categorisation.

For more information on the European Commission's Work Programme, read our insights here: European Commission Work Programme: Three omnibus proposals; plans to amend the Securitisation Regulation and SFDR; FIDA remains on the list

Omnibus Simplification Packages

The Commission had already published its Competitiveness Compass on 30 January 2025 in which it signposted three planned omnibus packages. The main aim of the three omnibus packages is to reduce the reporting burden by at least 25% for all companies, and by at least 35% for all SMEs.

The first two omnibus packages were published in February 2025, with the third (which will deal with defining small mid-cap firms and removing paper requirements) due for publication in Q2 2025.

The first omnibus package includes proposals to amend the Corporate Sustainability Reporting Directive (CSRD) and Corporate Sustainability Due Diligence Directive (CSDDD), postpone by 2 years the CSRD reporting requirements for companies in the second and third waves, and delay the transposition and application of the CSDDD by 1 year.

This means that CSRD obligations for companies due to report in 2026 and 2027 would be postponed by 2 years (so companies currently due to report in 2026 on FY 2025 data would report in 2028 on FY 2027 data instead). The proposal would not amend the reporting timeframe for companies reporting in 2025 on FY 2024.

Mandatory CSRD reporting would be limited to large companies with >1,000 employees (and either a turnover >€50 million or a balance sheet total >€25 million). Listed SMEs and large undertakings with up to 1,000 employees would be excluded. This would align the CSRD's scope more closely with the scope of the CSDDD. The net turnover threshold for non-EU companies would increase from €150 million to €450 million (generated in the EU).

The ESRS would be revised, the requirement to report from a "double materiality" perspective would be retained, but the mandate for sector-specific ESRS would be removed.

A proposed derogation from Article 8 of the EU Taxonomy Regulation would give large undertakings with >1,000 employees and a net turnover not exceeding €450 million an 'opt-in' whereby such companies would be subject to taxonomy disclosures only where they claim that their activities are 'taxonomy-aligned'.

For companies outside CSRD's scope the Commission proposes to adopt a voluntary standard, based on the VSME standard developed by EFRAG.

Regarding CSDDD, the transposition deadline for Member States would be postponed by 1 year to 26 July 2027 with application for the first phase of companies postponed by 1 year to 26 July 2028. Notably, from a financial services perspective, the review clause regarding the potential extension of CSDDD's scope to downstream financial services activities would be removed and the requirement to "put into effect" the climate transition plan would be deleted. Instead, the plan should include implementation actions planned and taken, aligning with CSRD reporting requirements.

The Commission also launched a consultation on a draft delegated act amending the Taxonomy Disclosures Delegated Act and the Taxonomy Climate and Environmental Delegated Acts.

These legislative proposals will now be submitted to the European Parliament and the Council for consideration and adoption. The proposed amendments are set out in two draft directives: the first directive focuses on timing i.e. postponing second and third wave reporting under CSRD and postponing transposition and application of CSDDD. The second directive sets out the other proposed amendments to CSRD and CSDDD.

The Commission encouraged the Parliament and the Council to prioritise this omnibus sustainability reporting package, in particular the first directive which, as currently drafted, is required to be transposed by Member States by 31 December 2025. Member States will have a 12-month transposition period for the amendments to both CSRD and CSDDD set out in the second directive once it enters force.

For more information, read our insights here: Omnibus Package: Proposed Amendments to CSRD and CSDDD

The second omnibus package was also published (a proposal to amend the InvestEu Regulation and the EFSI (European Fund for Strategic Investments) Regulation).

AIFMD

ESMA's consultation paper on draft regulatory technical standards (RTS) on open-ended loan originating alternative investment funds (AIFs) under the revised Alternative Investment Fund Managers Directive (AIFMD II) closes for feedback on 12 March 2025.

The consultation seeks feedback on the draft RTS that set out the requirements with which loan-originating AIFs need to comply with to maintain an open-ended structure.

AIFMD II introduced certain harmonised rules on loan originating funds. The aim was to provide a common implementing framework for AIFMs and national competent authorities (NCAs) by setting out the elements and factors that AIFMs need to consider when demonstrating to their NCAs that the loan originated AIFs they manage can be open-ended.

Under AIFMD II, loan originating AIFs will be closed-ended unless their manager can demonstrate to its home NCA that their liquidity risk management system is compatible with their investment strategy and redemption policy.

ESMA plans to finalise the draft RTS by Q3/Q4 2025.

CAPITAL REQUIREMENTS REGULATION (CRR)

The European Commission's Call for Evidence: Net Stable Funding Ratio – prudential treatment of short-term securities financing transactions closes for responses on 10 March 2025. The proposal would amend the CRR to make permanent the currently temporary treatment of short-term securities financing with financial customers for the calculation of the net stable funding ratio.

The EBA's public consultation on draft RTS clarifying and enhancing the conditions for assessing material model changes and extensions following a review of the related Delegated Regulation closes on 10 March 2025. The EBA's review aims to align the existing Delegated Regulation with the amendments brought in by CRR 3, and to introduce amendments to enhance the supervisory effectiveness of the approval process for model changes.

ESMA - EXTENDING INTERNAL CONTROLS FOR ADDITIONAL SUPERVISED ENTITIES

ESMA's consultation on draft Guidelines related to the Internal Control Framework for some of its supervised entities closes for feedback on 19 March 2025. The proposed Guidelines build on the Internal Control Guidelines currently in place for Credit Rating Agencies and extend them to include Benchmark Administrators, Trade Repositories, Data Reporting Services Providers and Securitisation Repositories. ESMA plans to publish a final report by Q4 2025.

EUROPEAN SINGLE ELECTRONIC REPORTING FORMAT AND SUSTAINABILITY REPORTING

ESMA's Consultation Paper on how the European Single Electronic Format (ESEF) can be applied to sustainability reporting closes on 31 March 2025. The Consultation Paper includes proposals for:

• Defining the marking-up rules for sustainability reporting; with a phased implementation for ESRS sustainability statements in 3 steps, each lasting 2 years, and a full implementation for Article 8 disclosures.
• Redefining the marking up approach for the Notes to the IFRS consolidated financial statements.
• Amendments to the RTS on the European Electronic Access Point.

ESMA plans to publish a final report in Q3 2025 and to submit the draft RTS to the Commission for endorsement.

LISTING ACT / MIFID

ESMA's consultation on draft RTS to establish an EU code of conduct for issuer-sponsored research closes on 18 March 2025. The draft code focuses on research providers rather than issuers, and proposes a minimum initial contract term of 2 years with at least 50% of the annual remuneration paid upfront.

MARKETS IN CRYPTO ASSETS REGULATION (MICA) UPDATES

ESMA's January 2025 statement was designed to reinforce the position regarding offers of asset referenced tokens (ARTs) and e-money tokens (EMTs) (stablecoins) in the EU under MiCA. Issuing, offering to the public and seeking admission to trading of ARTs and EMTs are regulated activities under to Titles III and IV of MiCA, which have applied since 30 June 2024. The EBA had previously called on stakeholders to establish procedures as soon as possible to assess MiCA compliance in respect of ARTs/EMTs for which they offer related services and to refrain, from 30 June 2024, from carrying out services that constitute offering to the public, seeking admission to trading or placing non-compliant ARTs/EMTs.

ESMA's January 2025 statement reiterated that NCAs are expected to ensure compliance by crypto asset service providers (CASPs) regarding non-compliant ARTs or EMTs as soon as possible, and no later than the end of Q1 2025.

In related developments, the following Level 2 regulations under MiCA apply from this month:

• Commission Delegated Regulation (EU) 2025/292 supplementing MiCA with RTS establishing a template document for cooperation arrangements between competent authorities and supervisory authorities of third countries. Applies from 5 March 2025.
• Commission Delegated Regulation (EU) 2025/293 supplementing MiCA with RTS specifying the requirements, templates and procedures for the handling of complaints relating to ARTs. Applies from 5 March 2025.
• Commission Delegated Regulation (EU) 2025/294 supplementing MiCA with RTS specifying the requirements, templates and procedures for the handling of complaints by CASPs. Applies from 5 March 2025.
• Commission Delegated Regulation (EU) 2025/296 supplementing MiCA with RTS specifying the procedure for the approval of a crypto-asset white paper. Applies from 5 March 2025.
• Commission Delegated Regulation (EU) 2025/297 supplementing MiCA with RTS specifying the conditions for the establishment and functioning of consultative supervisory colleges. Applies from 5 March 2025.
• Commission Delegated Regulation (EU) 2025/298 supplementing MiCA with RTS specifying the methodology to estimate the number and value of transactions associated to uses of ARTs and EMTs denominated in a currency that isn't an official currency of a Member State as a means of exchange. Applies from 5 March 2025.
• Commission Delegated Regulation (EU) 2025/299 supplementing MiCA with RTS on continuity and regularity in the performance of crypto-asset services. Applies from 5 March 2025.
• Commission Delegated Regulation (EU) 2025/303 supplementing MiCA with RTS specifying the information to be included by certain financial entities in the notification of their intention to provide crypto asset services. Applies from 12 March 2025.
• Commission Implementing Regulation (EU) 2025/304 supplementing MiCA with implementing technical standards (ITS) on the standard forms, templates and procedures for the notification by certain financial entities of their intention to provide crypto-asset services. Applies from 12 March 2025.

MIFIR / CONSOLIDATED TAPE PROVIDERS

The Commission's consultation on a draft Delegated Regulation extending the scope of its supervision of data reporting service providers (DRSPs) to include consolidated tape providers (CTPs) closes on 6 March 2025. It proposes changes to Commission Delegated Regulation (EU) 2022/803 on the procedures ESMA must follow to impose fines or penalties on DRSPs under its supervision. The aim is to ensure that, in the light of the upcoming CTP authorisation process, the scope of application of the procedural rules for ESMA's supervision of all types of DRSP includes CTPs. The procedural rules cover rights of defence, the collection of fines or periodic penalty payments, and the limitation periods for imposing and enforcing fines and periodic penalties.

OPERATIONAL RESILIENCE / DORA UPDATES

The deadline for in-scope financial entities to submit their first Register of Information is fast-approaching – read our related insights here: DORA Register of Information – The Final Stretch.

The following Level 2 regulations under DORA apply from this month:

• Commission Delegated Regulation (EU) 2025/295 supplementing DORA with RTS on harmonisation of conditions enabling the conduct of the oversight activities applies from 5 March 2025.
• Commission Delegated Regulation (EU) 2025/301 supplementing DORA with RTS specifying the content and time limits for the initial notification of, and intermediate and final report on, major ICT-related incidents, and the content of the voluntary notification for significant cyber threats applies from 12 March 2025.
• Commission Implementing Regulation (EU) 2025/302 supplementing DORA with ITS on the standard forms, templates and procedures for financial entities to report a major ICT-related incident and to notify a significant cyber threat applies from 12 March 2025.

RETAIL INVESTMENT STRATEGY

Trilogues are provisionally due to start on 18 March 2025.

For more information, read our insights here:

Retail Investors and the EU Capital Markets: Commission publishes retail investment package

The European Commission's Retail Investment Strategy

Capital Markets Union and greater access to sources of finance: ESMA publishes Position Paper.

SECURITISATION

As mentioned above, a legislative proposal to amend the EU Securitisation Regulation is planned for Q2 2025, following the Commission's eight-week targeted consultation in Q4 2024. For more information on that consultation, read our earlier briefing: EU Securitisation Regulation: Commission launches 8-week consultation.

The Commission has also launched a call for evidence on its review of the EU securitisation framework, which closes on 19 March 2025. This is a step that it is required to take before it can publish its proposed changes to the EU Securitisation Regulation. It doesn't pose specific questions. Instead, it aims "...to gather the views and experience of relevant stakeholders with experience of the functioning of the current Securitisation Framework and its subsequent amendments, as well as its possible evolution in the forthcoming review."

It confirms that the Commission is assessing and where necessary will remove "existing barriers which unduly restrict issuance and investments in the EU securitisation market, while safeguarding financial stability. Potential legislative policy options will be focused in the areas that currently are perceived as a barrier to securitisation issuance and investment, such as certain transparency, due diligence, and prudential requirements for banks and insurance companies. The potential policy options will be assessed against a baseline scenario without legislative or non-legislative changes, which takes into account existing national and EU policies and tries to anticipate important technological and social developments."

ESMA has also published its planned consultation on targeted changes to the disclosure framework for private securitisations under the EU Securitisation Regulation. In light of the impending changes to the Level 1 text of the EU Securitisation Regulation (due for publication in Q2 2025), ESMA has decided to focus for the time being on limited changes to the disclosure templates. Its aim is to reduce the disclosure burden. Plans for more wide-ranging changes to the disclosure templates are postponed until after the changes to the Level 1 text of the EU Securitisation Regulation are largely agreed. The consultation closes on 31 March 2025.

ESMA is working with the European Commission to see whether it's viable to make the private securitisation-specific amendments to the existing regulatory technical standards on disclosure before the Level 1 review of the EU Securitisation Regulation is implemented. If the Level 1 review is published as planned in Q2 2025, it would be well into 2026 before it is finalised and implemented.

For more information, read our latest insights: Private Securitisations: ESMA proposes streamlined disclosure template

This article contains a general summary of developments and is not a complete or definitive statement of the law. Specific legal advice should be obtained where appropriate.