On the Domestic Front:

Central Bank of Ireland Publications in relation to the Fitness and Probity Regime and In Situ Pre Approval Controlled Functions

The Central Bank has published the following documents in relation to the Fitness & Probity Regime and to assist Regulated Entities in confirming to the Central Bank that a due diligence has been undertaken for persons in PCF roles as at 1st December 2011:

  • Fitness & Probity: Frequently Asked Questions – an FAQ has been drawn up to answer frequently asked questions in relation to the operation of the Fitness & Probity Regime.
  • IQ Bulletin on how to submit confirmation of due diligence undertaken – this Bulletin outlines the steps a regulated financial service provider needs to take to notify the Central Bank that it has undertaken the necessary due diligence on holders of in-situ Pre-approval Controlled Functions.

The Central Bank has also published Guidance in relation to the due diligence to be undertaken in respect of all pre-approval controlled functions, which we reported on in our Client Bulletin of 13 March 2012. 

Central Bank Guidance on Investigations under Part 3 of the Central Bank Reform Act 2010

The Central Bank Reform Act 2010 (Procedures Governing the Conduct of Investigations) Regulations 2012 (S.I. No. 56 of 2012) set out certain procedures to be followed in the exercise of the powers of the Bank, the Governor or the Deputy Governor (Financial Regulation).  The Central Bank has issued a Guidance note in relation to the manner in which such investigations will operate but will not replace any of the provisions of the Act.

The Guidance addresses the four key stages of the process as envisaged by Part 3 of the Act as follows: (i) Preliminary Consideration, (ii) The Investigation, (iii) The Report and (iv) The Decision. 

On the European Front:

European Commission consultation on shadow banking

The European Commission has launched a public consultation on shadow banking so as to increase the understanding of what shadow banking actually is and does, and what regulation or supervision may be appropriate and to investigate the options around regulating shadow banking activities.   

Shadow banking activities may include (i) money market funds and other types of investment funds or products with deposit-like-characteristics and (ii) investment funds that provide credit or are leveraged such as hedge funds, finance companies and securities entities providing credit or credit guarantees and insurance undertakings that issue or guarantee credit products. 

Such activities provide additional sources of funding and offer alternatives to bank deposits.  They are also exposed to many of the same risks as banks, without having the safety net put in place by regulation and supervision.  Activities are often financed through short term funding, which may be withdrawn at any moment by clients. 

The purpose of the Green Paper is to consult stakeholders on shadow banking issues: definition, risks and benefits, the need for stricter monitoring and regulation, outstanding issues and next steps.  The consultation focuses on a number of areas: banking regulation, securities lending/re-purchase agreements and securitisation.  Stakeholders are invited to respond before 1 June 2012. 

The Commission has also issued a FAQ on Shadow Banking which includes questions such as what is shadow banking and what is the size of the shadow banking sector, who are the shadow banking entities and are shadow banking activities dangerous? 

ESMA allows EU-registered CRAs to endorse Credit Ratings Issued in Certain Jurisdictions

The European Securities and Markets Authority has announced that it considers the regulatory frameworks of credit rating agencies in the United States of America, Canada, Hong Kong and Singapore to be in line with European rules and that European banks can continue to use credit ratings from the US, Singapore, Canada and Hong Kong in their calculations of regulatory capital.

European Commission Proposal on Improving Securities and FAQ

The European Commission has published a proposal for a Regulation of the European Parliament and of the Council on improving Security Settlement in the EU and on Central Securities Depositories (CSDs).  Currently, CSDs are regulated only at the national level and the Commission comments that, due to the different national rules and limited competition between CSDs, the settlement markets in the EU are fragmented and cross-border settlement is less safe, more costly and less efficient than domestic settlement.

The proposed regulation aims to introduce common standards across the EU for security settlement in CSDs to address these issues.  Currently, the time between trade and settlement is not harmonised in the EU and this creates disruptions in cross-border settlements.  It is also proposed that CSDs must put in place procedures which apply when participants fail to deliver securities on the settlement date.      

The Commission has also published an FAQ in relation to the proposed Regulation and includes questions such as (i) what is a settlement? (ii) what is a CDS? (iii) why is this legislation being proposed? and (v) what are the specific objectives of the legislation?

British Bankers' Association to Review the Rate Setting Process for LIBOR

The British Bankers' Association has met with HM Treasury, the Bank of England and the FSA to review the rate-setting process for LIBOR and to consider the impact of future market and regulatory developments on LIBOR. This review comes amid press reports that some overseas regulators are conducting investigations into the alleged manipulation of LIBOR in price-setting for certain financial products. Discussions with interested parties are expected to commence shortly.

European Commission Consultation on Bank Accounts

On the 20 March 2012, the European Commission published a consultation on bank accounts.  The purpose of this consultation is to obtain stakeholders' views on the need for action and on the possible measures to be taken in relation to the issue of transparency and comparability of bank account fees, bank account switching and access to a basic payment account.