From Principles To Practice: ESMA's Approach To Third-Party Risk Supervision

In June, the European Securities and Markets Authority ("ESMA") published fourteen non-binding Principles on third-party risks supervision (the "Principles"). The purpose of the Principles is to facilitate the creation of a common framework to be used by EU-domiciled National Competent Authorities ("NCAs") to identify, assess and supervise third-party risks of the firms they regulate.

Through the use of these Principles, ESMA's intention is to foster a consistent and streamlined approach to third-party risks supervision by the NCAs, including as it relates to loss of control, non-compliance with regulatory provisions, reduced operational resilience, security issues and exposure to concentration risks, and to allow for further supervisory convergence in this area.