As noted in our SFTR reporting update for buy-side firms, one of the obligations under SFTR is the need to report certain historic SFTs (the so-called “backloading” obligation).
However, following an updated statement from ESMA regarding the impact of Covid-19 on the reporting obligations under SFTR, it appears that (amongst other things) ESMA expects competent authorities not to prioritise their supervisory actions towards counterparties in respect of SFTs subject to the backloading obligation.
In interpreting this, ICMA has already helpfully stated that “in effect, this clarification allows all firms subject to SFTR reporting to no longer consider backloading as a requirement”, ISLA has similarly stated that “ISLA’s understanding from the statement is that all backloading will not be prioritised for all phases of SFTR, effectively allowing all firms to no longer consider backloading as a requirement”, and the Financial Conduct Authority has confirmed that it “will not prioritise supervision relating to the reporting of SFTs for firms to which the backloading requirement specified in Article 4(1)(a) applies [i.e. the backloading obligation]”.
The situation remains subject to further change; however, this is further welcome relief for the industry which is facing significant challenges.
ESMA understands that the SFT reporting implementation is now heavily impacted by the COVID-19 pandemic.