Central Bank imposes new reporting requirements on SPVs

In July this year the Central Bank published a report which raised concerns over the lack of available information on the activities of Irish registered Special Purpose Vehicles. The report warned that some of the characteristics of Irish SPVs could potentially pose a risk to international financial stability. The report also found that there was limited granular data which made it difficult to accurately assess the financial stability implications of activities in the non-bank financial sector.

Following on from the report, the Central Bank has extended the quarterly reporting requirements applicable to financial vehicle corporations to SPVs in an attempt to improve the level of transparency and oversight of this sector.

A link to the Central Bank report is below.

Data Gaps and Shadow Banking: Profiling Special Purpose Vehicles' Activities in Ireland

Click here for the Central Bank’s Notes on Compilation in relation to SPV reporting published this month.

High Court rules on jurisdiction dispute

Blagnac Investments Limited v AIB plc and Tom O’Brien

The High Court has ruled that it has jurisdiction to deal with a challenge by a group of Irish investors in a Radisson Blu Hotel in France. The investors are challenging the Bank’s planned action to take over their shares in the hotel following their failure to repay sums allegedly owing to the Bank. The High Court ruling was made despite a finding by the Toulouse Commercial Court that it had jurisdiction to deal with the proceedings as the main centre of interest was in France. The decision was granted on the basis that the matters currently before the French court did not have any impediment on the High Court’s jurisdiction.

New Credit Guarantee (Amendment) Bill 2015 published

The Government has published the Credit Guarantee (Amendment) Bill 2015. The Bill provides for a number of amendments to the Credit Guarantee Act 2012, which is aimed at better aligning the credit guarantee scheme with the SME market in order to improve the uptake amongst SMEs.

The amendments contained in the Bill propose to change the definition of lender to permit the Minister to certify additional financial product providers such as lessors, factors, invoice discounters and other non-bank financiers; to change the definition of loan agreements to include non-credit products such as invoice finance and leasing, and to include overdrafts; to rebalance the risk between the State and finance providers; and to charge an appropriate premium for the Guarantee.

Click here to see the Bill and the Explanatory Memorandum.

Danske Bank A/S v Crowe and Crowe

Kearns P delivered judgment in this case on 9 September 2015. The plaintiff bank in this case issued proceedings against the defendants seeking judgment in the amount of approximately €1.2 million, in respect of various business related loans made by the bank. The defendants asserted that the plaintiff bank was not duly licenced in the jurisdiction and therefore could not maintain the proceedings.

The loan facilities the subject of the proceedings had been originally granted by National Irish Bank to the defendants. The banking business of National Irish Bank, including the defendants’ loan facilities, was transferred to the plaintiff bank in 2007 under a scheme of transfer which was approved by the Minister for Finance under the provisions of SI 29 of 2007.

The defendants argued that SI 29 of 2007 was void and that the Minister was only permitted to approve transfers between entities holding a Central Bank licence on the basis of section 33 of the Central Bank Act 1971 (the “1971 Act”). As the plaintiff bank had never been issued with such a licence, the defendants argued that the transfer was void.

However, the court found that the provisions of section 33 of the 1971 Act had been superseded and expanded by the EC (Licencing and Supervision of Credit Institutions) Regulations 1992 which permitted any credit institution already licenced in another Member State to carry on banking business in Ireland without the need for a licence from the Central Bank. The Court was satisfied that as a result of the Regulations, by 1 January 1993 it was no longer necessary for each bank that was party to a scheme of transfer of banking business to hold a licence issued by the Central Bank of Ireland in order to come within the scope of section 33 of the 1971 Act.

Click here to view the judgment of Kearns P.

CBI Internal Rules as Resolution Authority under the BRRD Regulations

The Central Bank has published its internal rules as the resolution authority in the State regarding professional secrecy and information exchanges between the resolution authority and the other functional areas of the Central Bank for the purposes of the EU (Bank Recovery and Resolution) Regulations 2015 (the “BRRD Regulations”).

Click here to view the rules.

Central Bank updated Fitness and Probity FAQ document

The Central Bank of Ireland has recently updated the Fitness and Probity FAQ document for the second time this year. The latest amendments to the document include some updates to existing questions to reflect the addition of the new PCF roles created under the Central Bank Reform Act 2010 (Sections 20 and 22) (Amendment) Regulations 2014.

Click here for a copy of the updated document.

European Banking Authority issues revised list of ITS validation rules

The EBA has issued a revised list of validation rules in its Implementing Technical Standards on supervisory reporting. The new rules highlight a number of rules which have been deactivated either for incorrectness or for triggering IT problems. Competent authorities throughout the EU are informed that data submitted in accordance with these new standards should not be formally validated against the set of deactivated rules.

Click here to view the updated validation rules.

MiFID Client Asset Regulations to take effect from October

The Central Bank’s new Client Asset Regulations, which apply to investment firms, are effective from 1 October 2015.

The Regulations replace the current Client Asset Requirements and aim to further enhance and strengthen the processes and controls that an investment firm is required to have in place in order to protect and safeguard client assets. The Regulations contain seven principles which the Central Bank has identified as being essential for an effective client asset protection regime. Those principles are:

  1. Segregation - investment firms should hold client assets completely separate from their own assets and maintain accounting segregation between each set of assets;
  2. Designation and registration - client assets should be clearly identifiable in an investment firm’s internal records;
  3. Reconciliation - an investment firm should keep accurate books and records in respect of the assets held for each client and should reconcile its records against those of any third party with whom client assets are held;
  4. Daily calculation - an investment firm should each day ensure that its client asset bank accounts reflect the amounts showing as at the end of the previous working day;
  5. Client disclosure and consent - an investment firm should provide information to its clients in a way that seeks to inform the client of where and how their assets are being held and the resulting risks arising therefrom;
  6. Risk management - an investment firm should have a suitable risk management process in place in order to identify risks in respect of client assets and put mitigates in place to address any such risks; and
  7. Client asset examination - an investment firm should engage the services of an external auditor on at least an annual basis to report on the firm’s safeguarding of client assets.

Click here to view a copy of the Regulations and the Central Bank guidance.

The Investor Money Regulations will impose similar requirements on fund service providers holding investor money in client accounts with effect from 1 April 2016.