Financial Services Regulation and Compliance - Banking June 2022
Domestic
BPFI statement post CEO roundtable
On 29 June 2022, the CBI welcomed the statement from the Banking and Payments Federation Ireland (BPFI) following the CEO roundtable meeting. At the meeting, the retail banks set out the programme of work being undertaken by sector to manage the migration of personal and business bank accounts. The key areas identified for further work include:
- better planning – providing strategic direction and oversight of operational capacity, driven by analysis of key data metrics at industry level, so that expected surges in customer activity and emerging issues can be dealt with
- support for customers as needed – targeted interaction for customers in need of additional support
- proactive communications – the rollout of a public awareness and information campaign launching in July aimed at providing comprehensive advice, support and practical tools to customers who need to move their banking services
- system-wide engagement – stakeholder engagement, including through a dedicated Customer Transition Working Group established under the auspices of the BPFI, with other sectors and their representatives, including those who are also required to respond on behalf of their own customers
The CBI emphasised that it expects a strong customer-focused approach from the retail banking sector. The CBI will continue to engage proactively with the sector as these plans are implemented and is prepared to intervene further if the exercise does not proceed in line with the CBI's expectations.
CBI calls on firms to prevent IBAN discrimination
On 17 June 2022, the CBI issued a press release to remind all firms of their obligations under the Single European Payments Area Initiative (SEPA). The SEPA regulations prohibits refusal to accept non-Irish IBANs within the SEPA area. The CBI reminds providers and facilitators of SEPA credit transfer and direct debit services of their obligations under SEPA. Firms should take any actions required to achieve full compliance with the SEPA regulations, thereby preventing cases of IBAN discrimination from occurring at the outset.
CBI's framework for macroprudential capital
On 14 June 2022, the CBI published its updated strategy for macroprudential capital buffers. The document discusses the CBI's strategy for the use of macroprudential capital buffers, the refreshed strategy for the countercyclical capital buffer (CCyB) and the other systemically important institutions (O-SIIs) buffer strategy.
The key outcomes from CBI's review of its macroprudential capital strategy include:
- the CBI is updating its strategy for deploying macroprudential capital tools, and
- when macro-financial risks are neither elevated, nor subdued, the CBI will set a positive CCyB rate
European
ITS on benchmark portfolios, reporting templates and reporting instructions for CRD IV reporting amended
On 30 June 2022, the Commission Implementing Regulation 2022/951 amending the implementing technical standards (ITS) laid down in Implementing Regulation 2016/2070 as regards benchmark portfolios, reporting templates and reporting instructions to be applied in the EU for the reporting referred to in Article 78(2) of the Capital Requirements Directive IV was published in the EU's official journal. The Commission Implementing Regulation enters into force on the 20 July 2022.
ECB opinions on proposed amendments to CRD
On 30 June 2022, the ECB published its opinion of 27 April 2022 on the proposed amendment to CRD as regards supervisory powers, sanctions, third-country branches, environmental, social and governance risk. The opinion addresses issues of particular importance to the ECB, which includes:
- environmental, social and governance risks
- introduction of the output floor
- the fit and proper framework
- third-country branches requirements
- direct provision of banking services in the EU by third country undertakings
- supervisory powers
- administrative sanctions
- supervisory benchmarking
- disclosure
On 16 June 2022, the ECB also published its opinion of 24 March 2022 on the proposed amendments as regards requirements for credit risk, credit valuation adjustment risk, operational risk, market risk and the output floor. The opinion provide detailed views on the main elements of the proposal and on the remaining risks that could be insufficiently covered if the EU decides to depart from Basel III standards.
EBA replies to Commission's call for advice on the Mortgage Credit Directive review
On 23 June 2022, the EBA published an opinion and report in response to the European Commission's call for advice on the review of the Mortgage Credit Directive (MCD). The EBA proposes to review the MCD to facilitate the smooth functioning of the internal market for mortgages, foster a level-playing field across all types of lenders and ensure a high level of consumer protection across EU Member States. The EBA identified some specific issues to be addressed. In particular, the EBA suggests:
- revising the requirements on pre-contractual and advertising information to provide consumers with the appropriate information to make an informed decision and to compare products
- ensuring that the requirements on information disclosure are fit for digital channels
- introducing additional consumer protections measures when artificial intelligence systems are used for creditworthiness assessment
- introducing borrowers-based measures in the information provided to consumers to promote responsible lending and borrowing while contributing to financial stability
- establishing an EU-wide definition of 'green mortgages' to encourage sustainable lending and borrowing
RTS on how to determine indirect exposures to a client
On 28 June 2022, the Commission Delegated Regulation supplementing the Capital Requirements Regulation (CRR) with regard to regulatory technical standards (RTS) specifying how to determine the indirect exposures to a client arising from derivatives and credit derivatives contracts where the contract was not directly entered into with the client but the underlying debt or equity instrument was issued by that client was published in the EU's official journal. The delegated regulation sets out the requirements for:
- the determination of the indirect exposure value to a client arising from derivative and credit derivative contracts
- allocation of the indirect exposures to categories of derivative contracts
- calculation of the indirect exposure value for options on debt and equity instruments, credit derivative contracts and other derivatives listed in Annex II to CRR
- calculation of the indirect exposure values arising from multi-underlying derivative contracts
The delegated regulation enters into force on the 18 July 2022.
Delegated regulation amending RTS on calculation of credit risk adjustments under CRR
On 21 June 2022, Delegated Regulation (EU) 2022/954 amending the RTS laid down in delegated regulation (EU) No 183/2014 as regards the specification of the calculation of specific and general credit risk adjustments under the CRR, was published in the Official Journal of the European Union. The delegated regulation will come into force on 11 July 2022.
EBA annual report 2021
On 15 June 2022, the EBA published its annual report 2021. The report highlighted EBA's achievements in 2021 and outlines EBA's priorities for 2022. EBA's 2022 priorities include:
- monitoring and updating the prudential framework for supervision and resolution
- revisiting and strengthening the EU-wide stress testing framework
- banking and financial data – enhancing EBA's analytical capacities and enhancing market discipline through a Pillar III data hub and integration with the EU single access point
- digital resilience, fintech and innovation – deepening analysis and information-sharing
- fighting money laundering and terrorism financing and contributing to a new EU infrastructure
- providing tools to measure and manage ESG risks
- monitoring the evolution of asset quality and assessing the regulatory COVID-19 related support programmes, and maintaining COVID-19 reporting and disclosures requirements
Commission adopts two delegated regulations on RTS on market risk
On 14 June 2022, the European Commission adopted two delegated regulations supplementing the CRR with regard to RTS:
- specifying the criteria for assessing the modellability of risk factors under the internal model approach and specifying the frequency of that assessment under Article 325be(3) of CRR
- specifying the technical details of back-testing and profit loss attribution requirements under Article 325bf and 325bg of CRR
The European Parliament and the Council will now scrutinise the delegated regulations. If neither object, they will enter into force on the twentieth day following their publication in the EU's official journal.
EBA consults on guidelines to resolution authorities on the publication of their approach to implementing the bail-in tool
On 7 June 2022, the EBA launched a public consultation on its draft guidelines addressed to resolution authorities for the publication of their approach to implementing the bail-in tool. The guidelines aim to ensure that a minimum level of harmonised information is made public with regard to the mechanics underpinning the execution of the bail-in tool. The consultation is open until 7 September 2022. A public hearing on the draft guidelines will take place via conference call on 19 July 2022 from 10am to 12pm.
Sanctions imposed in response to the crisis in the Ukraine
Since February, the EU imposed a number of sanctions in response to the crisis in the Ukraine. Given that the crisis is developing and sanctions are continuing to evolve, the CBI is publishing details of new restrictive measures/sanctions that are adopted in this regard, as well as any associated EU/UN guidance, on their dedicated webpage.
For more information on these topics please contact any member of A&L Goodbody's Financial Regulation team.
Date published: 12 July 2022