Domestic

CBI publishes the Funding Strategy and Guide to the 2022 Industry Funding Regulations

On October 2, the Central Bank of Ireland (CBI) published the Funding Strategy and Guide to the 2022 Industry Funding Regulations (the guide). The regulations in the guide are the Central Bank Act 1942 (Section 32D) Regulations 2022 which set out the levying process and the basis on which individual regulated entities' levies are calculated.

The details of the calculation method for each industry category are set out in section 4 of the guide. The 2022 levy for credit institutions was set at €172,783 and the guide also stipulates that credit institutions will be liable to pay the CBI supplementary levies for the purposes of providing sufficient funds to recover costs arising from:

  • the conduct of inquiries and investigations under Part IIIC of the Central Bank 1942
  • tracker mortgage investigation and related issues
  • significant changes to business models and/or activities, where appropriate

Supplementary levies will be set out in separate levy invoices sent to relevant credit institutions

Autumn 2023 Government Legislation Programme

The Government Legislation Programme for the Autumn 2023 session has been published (the programme). The programme identifies 27 bills to be prioritised for publication and a further 24 bills to be prioritised for drafting. In relation to financial services, there are a small number of bills of relevance including:

  • The Financial Services and Pensions Ombudsman (Amendment) Bill: The purpose of this bill is to amend the Financial Services and Pensions Ombudsman Act 2017 to take account of the Zalewski ruling and to update elements where the FSPO could be viewed as administering justice. The Heads of Bill were approved in April and its pre-legislative scrutiny completed in June.
  • The Access to Cash Bill: This bill will provide Irish people with easier access to cash and also require ATM operators and Cash-In-Transit Companies to be authorised and supervised by the Central Bank of Ireland. The Programme states that Heads of Bill are being prepared.

European

European Council adopts new Distance Marketing in Financial Services Directive

On 23 October 2023, the European Council adopted a new directive concerning financial services contracts concluded at a distance, following approval by the European Parliament. This marks the final step of the EU decision-making process.

The new directive revises the current legal framework by repealing the existing Distance Marketing Directive (Directive 2002/65/EC), while including new and updated rules regarding financial services contracts concluded at a distance in a new chapter of the Consumer Rights Directive (Directive 2011/83/EU), which protects consumers engaging in all types of commercial practices.

The new rules under the directive:

  • offer clarity on the scope of the rules’ application
  • enhance the existing rules on information disclosure and modernise pre-contractual information obligations, with Member States given the option to impose stricter national rules in this area
  • establish the right of consumers to request human intervention if dissatisfied with websites that display automatic information tools (e.g. robo-advisors or chatbots) so that that they can better understand the effects of the contract on their financial situation
  • facilitate the right of withdrawal from contracts concluded at a distance – financial services providers are now required to make the withdrawal process readily accessible by featuring an easy to use and prominent “withdrawal function” on their platforms
  • introduce protections for consumers against dark patterns (deceptive user interfaces designed to manipulate users into taking unintended actions, such as buying products that they did not intend to buy), with Member States given the option to impose stricter national rules in this area

After being signed by the President of the European Parliament and the President of the European Council, the new directive will be published in the EU Official Journal and will enter into force 20 days later. Member States will then have 24 months to publish transposing measures and another six months to apply them.

ESMA publishes second consultation paper on MiCA technical standards

  1. draft RTS on the content, methodologies and presentation of sustainability indicators and adverse impacts on climate
  2. draft RTS on continuity and regularity in the performance of crypto asset-service providers (CASPs) services
  3. draft RTS on offering pre and post-trade data to the public
  4. draft RTS on content and format of order book records and record keeping by CASPs
  5. draft ITS on machine readability of white papers and the register of white papers
  6. draft ITS on the technical means for appropriate public disclosure of inside information

The deadline for comments on the second consultation package is 14 December 2023, after which ESMA will work on its final report and draft technical standards, which it expects to submit for endorsement by 30 June 2024.

EBA publishes three consultation papers in relation to governance and the issuers of ARTs under MiCA

On 20 October 2023, the European Banking Authority (EBA) published three consultation papers which form the second batch of MiCA policy products with the EBA expected to publish a third batch in November 2023. The consultation period in respect of all three papers will run until 22 January 2023.

EBA consults on draft guidelines on internal governance arrangements for issuers of ARTs under MiCA

The EBA published a consultation paper on its new guidelines on internal governance arrangements for issuers of asset-reference token (ARTs) under Markets in Crypto-Assets Regulation (MiCA). The draft guidelines specify the governance provisions that ART issuers must comply with, taking into account the principle of proportionality.

The purpose of the draft guidelines is to ensure the sound management of all risks associated with the activities of issuers of ARTs such as operational risks, including fraud, cyber and compliance risks. The guidelines are also intended to protect consumers and investors.

EBA consults on draft RTS on the governance arrangements on the remuneration policy under MiCA

The EBA published a consultation paper on its draft RTS on the minimum content of the governance arrangements on the remuneration policy under MiCA. These draft RTS specifies the main governance processes regarding the adoption, implementation and maintenance of the remuneration policy and the main policy elements that should be included in the remuneration policy.

In order to ensure cross sectoral consistency, these RTS set a framework similar to the remuneration framework for investment firms.

EBA consults on draft RTS on the procedure for the approval of white papers of ARTs issued by credit institutions

The EBA published a consultation paper on its draft RTS on the minimum content of the governance arrangements on the remuneration policy under MiCA. The aim of these draft RTS is to harmonise the approval procedure across the EU by laying down the steps and timeframes to be followed by credit institutions and by the relevant competent authority.

The draft RTS specify the main governance processes regarding the adoption, implementation and maintenance of the remuneration policy and the list the main policy elements that should be included in the remuneration policy.

ESMA and EBA publish joint guidelines consultation paper

On 20 October the EBA and ESMA published a joint consultation paper on two sets of joint guidelines:

  • Guidelines on the suitability assessment of members of the management body of issuers of ARTs and of crypto-asset service providers (CASPs).
  • Guidelines on the suitability assessment of shareholders and members with direct or indirect qualifying holdings in issuers of ARTs and in CASPs.

The draft joint guidelines on the suitability assessment of the members of the management body of issuers of ARTs and CASPs set out common criteria to assess the appropriate knowledge, skills and experience of members of the management body as well as their good repute, honesty and integrity and if they are able to commit sufficient time to perform their duties.

The provision of consistent and clear assessment criteria will reduce the likelihood of any differences in rule application and regulatory arbitrage and will help maintain transparency and promote trust within the industry.

The consultation runs until 22 January 2024.

ECB enters next phase for digital euro, the preparation phase

On 18 October 2023, the ECB announced its intention to move to the next phase of the digital euro project, the preparation phase. The announcement marks the completion of a two-year investigation phase which launched in 2021 and explored the design and distribution model for the digital euro.

In its announcement, the ECB also published a report which details its findings from the investigation phase. Based on their findings, the ECB has designed a digital euro that would be widely accessible to both individuals and businesses and its use facilitated by supervised intermediaries, such as banks and payment institutions.

The proposed design of the digital euro envisages it to:

  • be a digital form of cash that could be used for all digital payments throughout the euro area
  • ​be widely accessible, free for basic use and available both online and offline
  • offer the highest level of privacy
  • allow users to settle payments instantly
  • ​be used from person to person, at the point of sale, in e-commerce and in government transactions

The preparation phase commenced on 1 November 2023 and will initially last two years.

While the launch of the preparation phase is not a decision on whether to issue the digital euro, it will pave the way for a potential future decision.

European Commission adopts Delegated Regulation adding Cameroon and Vietnam to the list of high-risk third countries

The Commission Delegated Regulation (EU) 2023/2070 was published in the Official Journal, adding Cameroon and Vietnam to the EU list of high-risk third countries with strategic anti-money laundering and counter-terrorist financing deficiencies.

The Delegated Regulation entered into force on 18 October 2023.

EBA publishes European Supervisory Examination Programme for 2024

On 19 October 2023, the EBA published its European Supervisory Examination Programme (ESEP) for 2024. The purpose of the ESEP is to select key topics for heightened prudential supervisory attention that provides supervisors with a single set of priorities that should be implemented across Europe and drive convergence in the related supervisory work.

The EBA has identified the following three key topics for 2024:

Liquidity and funding risk

The EBA expects banks to manage liquidity and market-based funding proactively amid rising costs and should ensure reasonable liquidity buffers, which should go beyond regulatory requirements, if needed. Funding should be managed cautiously, and banks need to have processes in place to communicate swiftly with stakeholders to address potentially or partially wrong information that is spreading quickly and resulting in rapid deposit withdrawals or closure of funding markets.

Interest rate risk and hedging

The EBA expects supervisors to ensure that banks have efficient and effective interest rate risk management and interest rate hedging in place, including related risk management capabilities and systems. The EBA also expects that interest rate risk in the banking book management should adequately reflect the impact of substantially higher rates with the potential for further rises and help banks to test different scenarios of increases in interest rate.

Recovery operationalisation

The EBA expects banks to ensure that their recovery plans consider newly emerged risks and to ensure that recovery plans are regularly updated and contain credible and feasible recovery options that could be implemented to overcome potential crisis scenarios as well as satisfactory overall recovery planning.

EBA recommends enhancements to the Pillar 1 framework to capture environmental and social risks

On 12 October, the EBA published a report on the role of environmental and social risk in the prudential framework of credit institutions and investment firms. The report builds on the principles set out in the EBA May 2022 discussion paper on the role of environmental risks in the prudential framework.

The report recommends targeted enhancements to the risk categories of the Pillar 1 frameworks to capture and accelerate the integration of environmental and social risk across the framework.

In the report the EBA recommends a number of key short-term actions to be taken over the next three years as part of the implementation of the revised Capital Requirements Regulation and Capital Requirements Directive.

The key short-term proposals put forward by the EBA include:

  • include environmental risks as part of stress testing programmes under both the internal ratings-based and the internal model approaches under the Fundamental Review of the Trading Book
  • encourage inclusion of environmental and social factors as part of external credit assessments by credit rating agencies
  • encourage the inclusion of environmental and social factors as part of due diligence requirements and valuation of immovable property collateral
  • require institutions to identify whether environmental and social factors constitute triggers of operational risk losses
  • progressively develop environment-related concentration risk metrics as part of supervisory reporting

The report also considers a medium-to-longer term perspective and presents possible revisions of the Pillar 1 framework reflecting the growing importance of environmental and social risks.

Verena Ross delivers speech at the ESA consumer protection day

On 9 October 2023, Verena Ross, ESMA chair delivered a speech on financial education at the Joint ESA Consumer Protection Day 2023. In her speech, Ms. Ross noted, that the ESAs have joined forces on the consumer protection topic of financial education and have developed interactive factsheets directed to consumers to educate them on the two key themes of inflation/rising interest rates and sustainable finance.

In her speech Ms. Ross briefly touched on the three topics that were to be discussed during the day, cross-selling, the regulation of crypto-assets and greenwashing and noted that these were areas where in addition to the regulatory and supervisory responses, educating consumers is key.

Ms. Ross also noted that in November 2023, the ESAs together with the NCAs will publish an interactive factsheet to contribute to financial education input on sustainable finance, which will be available in all EU languages and will be promoted at a national level.

RTS in relation to the Crowdfunding Regulation are adopted

On 29 September, the European Commission adopted Delegated Regulation containing regulatory technical standards (RTS) which set out the requirements for crowdfunding servicing providers (CSPs) specifying requirements on credit scoring of crowdfunding projects, pricing and crowdfunding offers and risk management policies and procedures.

The draft RTS:

  • specify the required disclosures to investors that CSPs must make with regards to the methods used to calculate the credit score for crowdfunding projects and to suggest the price for crowdfunding offers
  • specify the factors that CSPs must consider to ensure fair and appropriate pricing of the loans they facilitate on their platforms
  • specify the factors CSPs are required to take into account to ensure the fair and appropriate pricing of loans
  • specify the methods and approaches CSPs are required to adopt in respect of credit risk assessment and loan valuation
  • specify the governance arrangements that crowdfunding service providers must have in place to support sufficient information for clients and to enable credit risk assessments, loan valuation and pricing

This Commission Delegated Regulation comes into force on the twentieth day following its publication in the Official Journal.

European Commission publishes its 2024 Work Programme

On 17 October, the European Commission published its 2024 work programme. In the programme the Commission sets out its achievements over the last four years, what remains to be done and outlines a number of new initiatives.

The programme contains the following:

  • 18 policy initiatives
  • 26 proposals and initiatives that are aimed at reducing administrative burdens without lowering social, safety, consumer protection, environmental or economic standards
  • six proposals for withdrawal
  • 16 evaluation and fitness checks
  • 154 pending proposals

The programme emphasises that the Commission has kept the number of new initiatives to a limited number in order to sufficiently focus on the remaining key legislative proposals and deliver on existing commitments.

Of particular note in respect of new initiatives are the ‘2040 Climate target’ to keep the EU on track towards climate neutrality by 2050 and the ‘industrial carbon management initiative’ which will set out a strategy for environmentally sustainable carbon capture, utilisation and storage deployment in the EU.