Financial Services Regulation and Compliance - Banking and Payments October 2023
Financial Services Regulation and Compliance - Banking and Payments October 2023
European Union (Bank Recovery and Resolution) (Amendment) Regulations 2023
On 2 October 2023, the Minister for Finance made the European Union (Bank Recovery and Resolution) (Amendment) Regulations 2023 which came into operation on 15 November 2023. The Regulations amend the European Union (Bank Recovery and Resolution) Regulations 2015 (the 2015 Regulations). The 2015 Regulations transposed the European Union Bank Recovery and Resolution Directive (BRRD), and further amendments are required to address changes introduced by Regulation 2022/2036 (the so-called “Daisy Chain” Regulation) and Directive 2019/879 (BRRDII).
CBI hosts meeting of the Irish Retail Payments Forum
The seventh meeting of the Irish Retail Payments Forum (IRPF) was recently hosted by the CBI.
Key items from the meeting include:
an overview from the DOF on the Retail Banking Review
an overview from the CBI on the on issue of IBAN discrimination in Ireland
an update from the CBI on the ongoing review of the IRPF
an overview from Synch on the new Irish mobile payment’s app
The next meeting will take place on 7 December 2023 in person.
European Council adopts Directive on consumer credits
On 9 October 2023, the European Council adopted the revised Consumer Credit Directive (CCD II). The CCD II repeals and replaces the current 2008 directive in consumer credit agreements. The European Council press release states that CCD II will:
ensure that credit information is presented in a clear and understandable manner and is adapted to digital devices
establish stricter advertising rules
require lenders to assess whether consumers can repay their credit, so that they are protected from over-indebtedness
widen the scope of the requirements to loans below €200 and to buy-now-pay-later products
give consumers the right to terminate a credit agreement within 14 days
The Directive will enter into force on 19 November 2023. Member States must publish transposing measures by 20 November 2025 and apply those measures from 20 November 2026.
Basel Committee published report on the 2023 banking turmoil
On 5 October 2023, the Basel Committee on Banking Supervision (the Basel Committee) published a report on the 2023 banking turmoil. Within the report, the Committee addressed; the causes of the banking turmoil, the regulatory and supervisory responses and the initial lessons learnt.
Drawing on the findings included in the report, the Basel Committee is now pursuing a number of follow up initiatives which include:
Prioritising work to strengthen supervisory effectiveness and identify issues that could merit additional guidance at a global level.
Pursuing additional follow-up analytical work based on empirical evidence to assess whether specific features of the Basel Framework performed as intended during the turmoil, such as liquidity risk and interest rate risk in the banking book and assessing the need to explore policy options over the medium term.
SRB publishes report on resolution planning for small and medium sized banks
On 5 October, the Single Resolution Board (SRB) published a report on resolution planning and crisis management for less significant institutions (LSIs) for the first time.
The report is based on information made available to the SRB up until March 2023 and concerns a total of approximately 2,000 LSIs. The report provides an overview of the state of play on resolution planning and crisis management in respect of less significant credit institutions that are under the direct responsibility of the national resolution authorities.
ECB publishes report on how banks govern and manage CCR
On 20 October 2023, the European Central Bank (ECB) published its report (the report) on sound practices in counterparty credit risk (CCR) governance and management following a public consultation which ended in July 2023.
The report presents the findings of the targeted review performed in the second half of 2022 on how banks govern and manage CCR, with the report providing a collection of sound practices in CCR governance and management that were observed during the performance of the targeted review.
The report details 43 observed sound practices, drawn from the assessed institutions, and provides additional insights about the convergence towards those practices, accounting for the principle of proportionality. The report also highlighted a number of shortcomings and identified recommendations to address those shortcomings, which include:
Customer due diligence procedures, both at onboarding and on an ongoing basis, should be improved when dealing with non-banking counterparties and have a substantial impact on credit decisions and contractual conditions.
Institutions willing to accept complex CCR exposures should specify this explicitly in their risk appetite statement, rather than capture it implicitly through credit risk.
The stress testing framework should address counterparties’ creditworthiness and their vulnerability to specific exposure tail events, the framework should aim to identify counterparties whose solvency or liquidity position might come under pressure in certain market scenarios.
There is room for improvement in how, on a firm-wide basis, CCR is mitigated, monitored and managed when a counterparty is in trouble or defaults. Static margins for the most part have not yet been replaced with more risk-sensitive arrangements.
Basel Committee consults on the disclosure of crypto-asset exposures
On 17 October 2023, the Basel Committee published a consultation document on the disclosure of crypto-asset exposures. The consultation document is based on the disclosure requirements contained in the Basel Committee's final prudential standard on the treatment of banks' exposures to crypto-assets, which was published in December 2022.
In order to facilitate consistency of disclosures, the Basel Committee proposes a standardised disclosure table and set of templates for banks’ crypto-asset exposures, with a proposed implementation date of 1 January 2025. The Basel Committee expects that a common format for disclosures will support the exercise of market discipline and contribute to reducing information asymmetry amongst banks and market participants.
The proposal for these disclosures as set out in Annex 1 of the consultation paper, contains the following tables and templates:
qualitative disclosure on a bank’s activities related to crypto-assets and the approach used in assessing the classification conditions
crypto-asset exposures and capital requirements
accounting classification of exposures to crypto-assets and crypto-liabilities
liquidity requirements for exposures to crypto-assets and crypto-liabilities
The Basel Committee welcomes comments from the public and market participants on all aspects of the consultation document by 31 January 2024.
EBA publishes its 2024 Work Programme
On 3 October, the European Banking Authority (EBA) published its 2024 work programme, where the EBA identified the following five strategic priorities for the year ahead:
finalise the Basel implementation and enhance the Single Rulebook
monitor financial stability and sustainability in a context of increased interest rates and uncertainty
provide a data infrastructure at the service of stakeholders
develop an oversight and supervisory capacity for the Digital Operational Resilience Act (DORA) and the Markets in Crypto-Assets Regulation
increase focus on innovation and consumers and ensure a smooth transition to the new AML/CFT framework
In respect of deliverables, a number of noteworthy EBA deliverables for 2024 include:
to produce a final report on greenwashing by Q2 2024
to produce the following mandates envisaged by DORA; Regulatory Technical Standards (RTS) to specify threat-led penetration testing aspects, the RTS to specify elements when sub-contracting critical or important functions and the RTS on specifying the reporting of major ICT-related incidents