This article highlights the main developments that have taken place over the last month in the domestic and European banking sector.

On the domestic front:

Central Bank (Supervision and Enforcement) Bill 2011 – Consultation Document

The Minister for Finance has issued a Consultation Document on the proposed Committee Stage amendments to the Central Bank (Supervision and Enforcement) Bill 2011. The amendments are the result of a comprehensive collaboration between the Department and the Central Bank to improve and complement the provisions in the published Bill. Comments are invited by close of business on 25 May 2012. Read more

Central Bank briefing on Fitness & Probity to the IBF

The Head of Governance, Accounting and Auditing Policy of the Central Bank, Mairead Devine, has presented to the Irish Banking Federation on "Fitness & Probity – a New Regime".

The presentation focused on "Who - Functions in RFSPs which fall within the scope of Part III" and "What - Standards and key obligations on RFSPs".  The presentation is available on the Central Bank website.

Central Bank publishes consultation on the handling of insider information

The Central Bank of Ireland has issued a public consultation, Consultation Paper 58, on the Handling of Inside Information under the Market Abuse (Directive 2003/6/EC) Regulations 2005.

The consultation paper sets out recommendations in respect of new rules and guidance on the handling of inside information. 

The Central Bank is seeking comment and opinion on the following areas:

  • Determining what information is sufficiently significant for it to be deemed inside information. 
  • Types of insider list.
  • Director and personal account dealing and the definition of persons discharging managerial responsibility.

Comments are invited by interested parties by 14 June 2012.  

On the European front:

European Banking Authority publishes Consultation Paper for Assessing the Suitability of Members of the Management Body of a Credit Institution

The proposed guidelines in the Consultation Paper set out the process, criteria and minimum requirements for assessing the suitability of members of the management body and key function holders of a credit institution.  Poor governance arrangements, in particular inadequate oversight by the supervisory function of the management body, are widely acknowledged to have been one of the underlying causes of the financial crisis.  For this reason these guidelines are not confined to members of the management body acting in its management functions, but extend to the members of its supervisory functions so as to ensure appropriate oversight.

LMA launches new commercial real estate finance facility agreement

The Loan Market Association has published its new form of facility agreement for commercial real estate finance multi-property investment transactions.

European Banking Authority Questionnaire on the Identification of Users/Investors' needs on Credit Institutions Pillar III Disclosures

The European Banking Authority has published a questionnaire on the identification of users/investors needs on credit institutions' Pillar III disclosures.  The questionnaire invites interested parties to comment on the issues/areas that users of Pillar III disclosures consider to be the most important from their perspective and that, accordingly, should be the focus of the EBA's 2012 assessment of Pillar III disclosures.  The questionnaire will also provide the opportunity to identify possible stakeholders for future dialogue with the EBA on Pillar III issues once the analysis of the responses has been completed.   

Basel III Regulatory Consistent Assessment Programme

The Basel Committee on Banking Supervision has published a Basel III Regulatory consistency assessment programme.  A timely consistent implementation of Basel III is key to raising the resilience of the banking system and in ensuring market confidence.  In order to assist the implementation process, members of the Basel Committee have agreed on an assessment programme that will review and report on their implementation of Basel III.  This will be conducted on three levels:

Level 1: ensuring the timely adoption of Basel III;

Level 2: ensuring regulatory consistency with Basel III; and

Level 3: ensuring consistency of risk-weighted asset outcomes.

This document describes the Level II Review Programme which utilises a pier review process to assess the compliance of individual jurisdictions domestic regulations with the international minimum requirements defined by the Basel Committee. 

Progress Report on Basel III Implementation

The Basel Committee on Banking Supervision has published its second progress report on Basel III implementation.  This report tracks the implementation of Basel II, Basel 2.5 and Basel III by Committee member countries.  It outlines the progress of individual countries in transforming the committee's regulatory standards into national law or regulation according to the internationally agreed timeframes.

Systemic Risk in Global Banking

The Bank for International Settlements has published a working paper on systemic risk in global banking.  Recent financial crisis has shown how interconnected the financial world has become.  Supervisors and other agencies need more and better data to construct even rudimentary measures of risks in the international financial system.  Similarly, market participants need better information on aggregate positions and linkages to appropriately monitor and price risks.  Ongoing initiatives that will help close data gaps include the G20 data gaps initiative, which recommend the collection of consistent bank level data for joint analysis and enhancements to existing sets of aggregate statistics and enhancements to the BIS international banking statistics.   

Pier Review of Implementation of Stress-Testing Practices

The Bank for International Settlements has published a Press Release called "Implementation of Stress-Testing Practices by Supervisors – Basel Committee publishes Pier Review".  Stress-testing is an important tool used by banks to identify the potential for unexpected adverse outcomes across a range of risks and scenarios.  In 2009, the Basel Committee reviewed the performance of stress-testing practices during the financial crisis and published recommendations for banks and supervisors.  As part of its mandate to assess the implementation of standards across countries and to foster the promotion of good supervisory practice, the Committees Standards Implementation Group conducted a pier review during 2011 of supervisory authorities implementation of the principles.  Overall, the review found the stress-testing principles to be generally effective. E

BA Consultation Paper on Draft Regulatory Technical Standards for Own Funds

This Consultation Paper sets out draft Regulatory Technical Standards in relation to various articles of the Capital Requirements Directive which relate to the prudential requirements for Own Funds and which articles will become applicable from 1 January 2013.  The RTS cover areas such as Common Equity Tier 1, additional Tier 1 Capital, deductions from Common Equity Tier 1 Capital, general requirements like indirect holdings arising from index holdings, supervisory consent for reducing own funds and transitional provisions for own funds in terms of grandfathering.  Comments are invited by 4 July 2012.

Report on working towards effective Governance of Financial Institutions

The Group of 30 (G30) has stated that further improvements in corporate governance of major financial services firms are crucial to securing financial stability.  The G30 is an international forum of public and private sector financial leaders.  The reports state that although many financial services firms have drawn lessons from the 2008/2009 financial crisis and implemented substantial governance reforms, there is scope for further improvements. Joint Committee (EBA, EIOPA and ESMA) Publication – Medium term strategy for Joint Committee

This publication sets out the five areas in which the Joint Committee shall strive to deliver over the medium term.  The five areas are:

  1. Risk Assessment – to produce policy focused risk reports twice yearly;
  2. Regulatory Work – to develop technical standards and guideline in relation to legislative proposals which have cross sectoral ramifications such as the Financial Conglomerates Directive;
  3. Consumer Protection – produce cross sector consistence guidelines, recommendations and/or opinions to enhance consumer protection;
  4. Supervisory Practice – in relation to the supervision and enforcement of financial institutions, assess supervisory practices and risk based approaches, with a view to promoting cross sector consistent approaches and practices and adhere to timetables in relation to any legislative proposals or requests of the European Commission;
  5. Common Processes and Procedures – to have a common and consistent approach to all ESA processes and procedures.

ESMA – Memorandum of Understanding concerning Consultation, Co-operation and Exchange of Information relating to the Supervision of Cross-Border Regulated Entities

ESMA and the US Securities and Exchange Commission have signed a Memorandum of Understanding to facilitate the sharing and collection of information on regulated entities operating across borders.  The Memorandum documents the intention of the two authorities to co-operate and to fulfil regulatory duties with respect to globally active firms and markets.

ESMA – Transparency Directive (2004/109/EC) – Updated Questions and Answers

ESMA has issued an updated version of "Questions and Answers" on the Transparency Directive to promote common supervisory approaches and practices in the implementation of the Directive.  The Q&A:

  • Updates the answer to question 1 on the determination of the home member state for third country issuers in the case of delisting and admission to trading in another member state.  
  • Adds a new question 15 on the designation of an agent for the exercise of financial rights.