ESMA publishes final report on supervisory expectations for the governance arrangements of supervised entities

The European Securities and Markets Authority (ESMA) has published its final report setting out supervisory expectations for the governance arrangements of entities under its direct supervision. These include credit rating agencies, benchmark administrators of EU critical benchmarks and third-country recognised benchmarks, Tier 2 central counterparties, data reporting service providers, securitisation repositories and trade repositories. The report contains feedback from ESMA's July 2024 consultation. Based on the feedback, ESMA has revised its initial proposals to address concerns regarding the prescriptive nature of certain supervisory expectations based on proportionality grounds and the absence of a legal mandate for ESMA to enact regulation in the corporate governance area. As a result, the final framework has been restructured around 12 high-level principles.

These principles are designed to condense the previous draft into a set of core expectations and are drafted in the form of outcomes. They are intended to serve as a baseline for entities to build upon and may be applied proportionately, considering each entity's nature, scale and complexity. The more granular expectations contained in the consultation paper have now been reflected under one of the 12 core principles as supporting guidance, as ESMA believes that this guidance still provides useful insights for entities into how it assesses governance and oversight arrangements.

The final supervisory expectations are set out in Annex III of the report. ESMA will begin considering these expectations for the purpose of its supervision three months following publication of this final report, being January 2026.

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