DOMESTIC

Department of Justice and Equality publishes outline of "Scheme of Aid and Advice on Home Mortgage Arrears"
On 30 August 2016, the Department of Justice and Equality released on outline of the Government's new Scheme aimed at helping individuals who are in arrears on their mortgages and are at risk of losing their homes. A number of Government bodies are involved in delivering the Scheme including the Department of Social Protection, the Legal Aid Board and the Citizens' Information Board. The Scheme is designed to provide legal and financial advice and support to borrowers in serious mortgage arrears on their home so that they may find the best solution to remedying their situation. The Scheme will be in place for a maximum of three years from July 2016.

Central Bank of Ireland publishes Economic Letter on "Private Placement Instruments and the Wholesale Funding of the Banking System in Ireland"
In the 4th of the 2016 Volume of its Economic Letter Series, the CBI examined the use of private placement instruments as an alternative source of wholesale funding for Irish banks over the decade to the end of 2014. The letter examines a significant source of funding for Irish banks, private placement instruments, and addresses a gap in published statistics. The research confirmed that private placement activity peaked in 2007 when it made up about 14% of total balance sheet liabilities in the overall Irish banking system. This share had fallen significantly by 2014.


EUROPEAN

European Banking Authority welcomes proposal to bring virtual currency exchange within the scope of the 4th Anti-Money Laundering Directive
The EBA has issued an opinion welcoming the EU Commission proposal which seeks to bring virtual currencies within the scope of the 4th AMLD. The new rules, if implemented, would require virtual currency exchange platforms and custodian wallet providers to have policies and procedures in place to detect, prevent and report AML/CFT offences. The proposal also includes registration, licensing and fitness and probity requirements. The EBA has made a number of recommendations on the proposals made which include pushing the transposition date out to 26 June 2017 and ensuring that virtual currency transactions remain outside the scope of the revised Payment Services Directive. Other recommendations include a call for the EU Commission to provide further detail on how competent authorities should carry out the fitness and probity tests envisaged.

European Banking Authority recommends introducing a minimum leverage ratio in the European Union
The EBA has published a report recommending the introduction of a minimum leverage ratio in the EU which would prevent excessive leverage. This recommendation is in line with discussions in January 2016 among the Group of Central Bank Governors and Heads of Supervision. The EBA have produced analysis which shows that the introduction of a 3% requirement on the provision of financing by credit institutions would be 'relatively moderate' and has suggested that such a ratio would "lead to more stable credit institutions overall". The EBA intends to explore the possibility of introducing reduced reporting requirements of the ratio for smaller credit institutions, rather than exempting these credit institutions from the requirements.

European Banking Authority consults on Technical Standards under the revised Payment Services Directive
The EBA has published a Consultation Paper on draft Technical Standards on strong consumer authentication and common and secure communication. The EBA is seeking views to supplement the revised Payment Services Directive (PSD2) on exemptions from the application of strong customer authentication, rules on the protection of the confidentiality and the integrity of the payment service users' personalised security credentials, rules relating to standards of communication for authentication purposes and the use of website certificates. Submissions will be accepted up to 12 October 2016.

European Commission reports on the remuneration rules for credit institutions and investment firms
The EU Commission issued a report in accordance with its obligations under Article 161(2) of the Capital Requirements Directive (CRD) which requires the EU Commission to report to the European Parliament and Council on the efficiency, implementation and enforcement of the remuneration rules, and in particular on the impact of the maximum ratio between variable and fixed remuneration. The report contains a mostly positive assessment of the rules on remuneration introduced by CRD III in 2010. However, it is also stated that the deferral and pay-out instruments requirements may be inefficient in the case of small and non-complex credit institutions and investment firms, and of staff with low levels of variable remuneration. The EU Commission has undertaken to carry out an impact assessment examining options for addressing these issues, including exempting these smaller institutions and their staff from some of these requirements.

In respect of the maximum ratio between variable and fixed remuneration introduced by CRD IV, the report provides that there is not enough evidence to draw final conclusions until more implementation experience is gained.

European Banking Authority publishes final draft Regulatory Technical Standards on separation of payment card schemes and processing entities under the Interchange Fee Regulation
The EBA published its final draft RTS setting out the requirements which payment card schemes and processing entities must comply with to ensure independence under the IFR (Regulation (EU) 2015/751). Article 7 of the IFR provides that payment card schemes and processing entities must be "independent in terms of accounting, organisation and decision-making processes". The draft RTS seek to supplement this provision by setting out requirements relating to, for example, the allocation of expenses and revenue, the documentation of transfers of funds, functional and workspace separation, independence of senior staff members and management, remuneration, the use of shared services and the treatment of sensitive information. It is likely that these draft RTS will be in force by the end of 2016.

European Banking Authority publishes final draft RTS on the specification of the additional objective criteria to be considered when specifying the liquidity coverage ratio for credit institutions under the Capital Requirements Regulation
The EBA published final draft RTS on the specification of the additional objective criteria referred to in Articles 29(2) and 34(2) of Commission Delegated Regulation (EU) No 2015/61 (the LCR Delegated Act) under Articles 422(10) and 425(6) of the CRR, to be considered when specifying the liquidity coverage ratio for credit institutions under the CRR. The CRR recognises that when some institutions belonging to the same group experience liquidity difficulties in meeting their payment obligations, there is potential for intra-group financial support under stressed conditions. As such, Articles 422(8) and 425(4) of the CRR provide for the preferential treatment in the calculation of the required liquidity coverage requirement for credit institutions in respect of intra-group liquidity flows following the consideration of certain additional objective criteria. These additional criteria were broadly set out in the LCR Delegated Act and the final draft RTS have now been published to add the specific details. The additional objective criteria to be considered are as follows:

• the liquidity risk profile of the liquidity provider and receiver should be low;
• there should be legally binding agreements and commitments between the group entities regarding the undrawn credit or liquidity line; and
• there should be a consideration of the liquidity risk profile of the liquidity receiver in the liquidity risk management of the liquidity provider.

European Banking Authority launches consultation on draft Guidelines on credit institutions' credit risk management practices and accounting for expected credit losses
The EBA has launched a consultation on draft Guidelines on credit institutions’ credit risk management practices and accounting for expected credit losses. This consultation follows the publication of Guidance on the same matter by the Basel Committee at the end of last year. The consultation, which seeks responses up to 26 October 2016, aims to provide competent authorities with guidance for the evaluation of the effectiveness of a credit institution’s practices and policies that affect allowance levels.