Financial Services Regulation and Compliance - Banking Nov 2021
Financial Services Regulation and Compliance - Banking Nov 2021
Central Bank announces Director appointment in Strategy and Governance
On 1 November 2021, the CBI announced the appointment of Glenn Calverley as Director of Strategy and Governance, with effect from 1 December 2021. The Strategy and Governance Directorate contributes to the delivery of the mission and vision of the CBI by supporting and enabling the Commission and senior leaders to dynamically set the organisation's strategic direction and priorities. Glenn Calverly replaces Bernard Sheridan who will become Director of Currency and Facilities Management from 1 November, where he succeeds Paul Molumby who is retiring from the CBI.
Announcing these appointments Governor Makhlouf said: "We are pleased to announce these senior appointments to key positions today. Together these directors bring a wealth of experience to these portfolios and we look forward to continuing to work with them deliver our mandate and serve the public good.”
“Innovation, disruption and change: the Great Disintermediation” - Remarks by Gabriel Makhlouf at the 14th SSM Round Table
On 11 November 2021, Governor Makhlouf delivered a keynote address at the 14th European Single Supervisory Mechanism Roundtable.
Governor Makhlouf's remarks highlighted that technology is driving significant and rapid change leading to a transformation in the structure of the financial system and the "Great Disintermediation" of traditional financial services is underway. The key points was that we must all adapt to maintain stability for communities and ensure choice for consumers.
Governor Makhlouf's stated that climate change is the biggest issue we all face in our lifetime and the financial system has a key role to play in addressing this. The overarching challenge is how we manage change, and manage the risks from change. This is relevant in terms of sustainable finance, sustainable business, post-pandemic regulation, and effective supervision. Governor Makhlouf stated the CBI, is trying to be more open and engaged with our stakeholders and more future-focused in its thinking, actions and policies. Governor Makhlouf concluded by stating that we all will need to be flexible in the delivery of our strategies while prioritising competing demands, and in safeguarding the delivery of the fundamentals of our work.
“Pandemic recovery has continued, but the risk environment is shifting” - Governor Makhlouf launches Central Bank’s Financial Stability Review 2021:2
On 25 November 2021, the CBI published the second Financial Stability Review (FSR) of 2021. The FSR outlines key risks facing the financial system and the CBI’s assessment of the resilience of the economy and financial system to adverse shocks. The FSR indicates:
While uncertainty around the path of the pandemic remains, the economic recovery has continued over the past six months, reducing some of the near-term macro-financial risks.
More medium-term vulnerabilities have been building up, stemming from developments in global financial markets, higher levels of indebtedness internationally, and growing price pressures and capacity constraints in some sectors.
The impact of the pandemic on the financial position of borrowers and the banking sector has started to dissipate as the economy has re-opened.
The counter-cyclical capital buffer remains at 0%, in line with previous guidance and in order to continue to enable the banking sector to lend to support the economic recovery. However, if the economic recovery is not materially disrupted by the resurgence of the virus, the CBI expects to announce a gradual rebuilding of macroprudential capital buffers during 2022, to safeguard resilience against future risks.
ECB report shows card fraud declined in 2019
On 1 November 2021, the ECB reported that in 2019, the total value of fraudulent transactions involving cards issued in the Single Euro Payments Area (SEPA) amounted to €1.87bn out of a total value of all card transactions of €5.16tn. This means that 3.6c in every €100 spent using credit and debit cards were lost to fraud in 2019.
The report also found:
2019 registered the second lowest card fraud share since the start of data collection in 2007
80% of card fraud took place via online and mobile payments, while 15% took place in shops and 5% at ATMs
cross-border transactions accounted for 65% of the total value of card fraud
EBA reaffirms its commitment to support green finance in view of the UN Climate Change Conference
On 3 November 2021, the EBA published its environmental statement in the context of the 2021 United Nations Climate Change Conference (COP26), highlighting its efforts to update and enhance the entire supervisory and prudential regulatory framework in the environmental, social and governance (ESG) domain.
The EBA has an important role in supporting the European banking sector towards the objectives of transitioning to a more sustainable economy and mitigating risks stemming from climate change and broader ESG factors. ESG is one of the EBA’s multi annual priorities. Through its core regulatory and policy work as well as own operations the EBA is committed to making a positive contribution towards reaching the goals of the Paris Agreement, which also led to the creation of a dedicated ESG risks unit.
EBA publishes final draft technical standards on individual portfolio management by crowdfunding service providers
On 9 November 2021, the EBA published its final report on draft regulatory technical standards (RTS) specifying the information that crowdfunding service providers offering individual portfolio management of loans shall provide to investors in relation to the method to assess credit risk, and on each individual portfolio. The draft RTS also specify the policies, procedures and organisational arrangements that crowdfunding service providers shall have in place in relation to any contingency fund they may offer to investors. These RTS are the first of two mandates assigned to EBA with a view to contributing to a sound prudential and disclosure framework for crowdfunding service providers.
These draft RTS have been developed according to Articles 6(7) of Regulation (EU) No 1503/2020 (European Crowdfunding Service Providers Regulation), which mandates the EBA to develop draft RTS in close cooperation with the European Securities and Market Authority.
EBA publishes guidelines on recovery plan indicators
On 9 November 2021, the EBA published guidelines on recovery plan indicators. The guidelines establish a common EU approach for developing the framework of recovery plan indicators, providing additional guidance on indicators’ calibration, monitoring and breaches notifications. The guidelines provide a common EU approach for the recovery plan indicators to ensure they can promptly signal a stressed situation and enable the institution to consider timely and effective recovery actions. The key objective of the guidelines is to strengthen the quality of the recovery indicators framework in order to ensure institutions’ effective crisis preparedness. The 2015 guidelines (EBA-GL-2015-02) are repealed at the same time as the publication of these guidelines.
The EBA sets examination programme for prudential supervisors for 2022
On 12 November 2021, the EBA published the European Supervisory Examination Programme (ESEP) for 2022, which identifies key topics for supervisory attention across Europe. The ESEP is aimed at informing prudential supervisors’ planning processes and shaping their supervisory practices.
The five key topics identified for supervisory attention for 2022 are:
impact of the COVID-19 pandemic on asset quality and adequate provisioning
information and communication technology security risk and outsourcing risk, risk data aggregation
digital transformation and fintech players
environmental, social and governance risk
anti-money laundering and countering the financing of terrorism
Similarly, the EBA also published the European Resolution Examination Programme (EREP) for 2022, which identifies key topics for resolution authorities’ attention across the European Union. These topics are identified based on the EBA’s expertise in EU-wide policy development, its role in colleges and on the practical experience of resolution authorities. The programme mirrors the ESEP that has applied to prudential supervision in recent years.
EBA publishes its final revised guidelines on internal governance for investment firms under the Investment Firms Directive
On 22 November 2021, the EBA published its revised guidelines on internal governance for investment firms under the Investment Firms Directive (IFD). The IFD contains specific governance requirements for investment firms in parallel to and consistently with the ones already applicable under the Capital Requirements Directive (CRD). The guidelines provide further details on how the IFD governance provisions should be applied by Class 2 investment firms, specifying the tasks, responsibilities and organisation of the management body, and the organisation of investment firms, including the need to create transparent structures that allow for supervision of all their activities. The guidelines also specify requirements aimed at ensuring the sound management of risks across all three lines of defence. The EBA guidelines will apply to Competent Authorities across the EU, as well as to credit institutions and investment firms on an individual and consolidated basis from 30 April 2022.
The Eurosystem oversight framework for electronic payments (PISA) is published
On 22 November 2021, the Eurosystem published the oversight framework for electronic payment instruments, schemes and arrangements (PISA), following a public consultation in 2020. The framework aims to contribute to the efficiency and safety of the current and future payments ecosystem as part of the ECB’s statutory task to promote the smooth operation of payment systems. It replaces the current Eurosystem oversight approach and oversight standards for payment instruments, including all the related oversight frameworks for cards, direct debits and credit transfers, as well as the security objectives for e-money. The PISA framework is aimed at the governance bodies of schemes and arrangements. It also covers digital payment tokens (e.g. crypto-assets used within a scheme and stablecoins, alongside already overseen payment schemes of other payment instruments).
Companies that are already subject to oversight by the Eurosystem are expected to adhere to the principles of the new framework by 15 November 2022. Others will have a grace period of one year from the moment they are notified that they will be subject to oversight under the PISA framework.