Finnish Financial Supervisory Authority finds weaknesses in UCITS and AIF depositaries’ sustainability oversight and requires remediation plans

The Finnish Financial Supervisory Authority published the results of a thematic review of how depositaries for UCITS and alternative investment funds organise their activities and incorporate sustainability information into their oversight duties. The review, based on a survey of all five depositaries authorised in Finland, found that while core oversight of subscriptions and redemptions was generally appropriately arranged, there were persistent capacity and compliance gaps, particularly around sustainability-related checks. Personnel resources for depositary activities were still considered low despite further automation since the authority’s 2019 review. Some depositaries did not verify fund valuation at the frequency required by regulation, and the authority identified shortcomings in processes to verify sustainability risks and sustainability disclosures, including cases where sustainability information was not reviewed at all or reflected in the depositary’s required risk assessment. The review also noted the concentration of the Finnish depositary market, with depositaries reporting EUR 180.8 bn of assets safekept as of 30 June 2024 and around 95% held by three depositaries. Depositaries must review the thematic review report and their depositary-specific supervision letter, then report the remedial actions they will take and their implementation schedule. The authority will follow up on implementation and consider further depositary-specific measures as needed.