Financial Services Regulation and Compliance - Banking August 2022
Financial Services Regulation and Compliance - Banking August 2022
Countercyclical capital buffer rate announcement
On 24 August 2022, the CBI announced that the CCyB rate on Irish exposures is to be maintained at 0.5%. The 0.5% rate will take effect in June 2023. To meet the CBI's objective to promote resilience in the banking sector, the CBI will look to build-up the CCyB rate to 1.5% when risk conditions are deemed to be neither elevated nor subdued. The CBI outlined that, should macro-financial conditions evolve consistent with the central outlook for the economy, a 1.5% rate would be expected to be announced in mid-2023.
CBI responds to the retail banking review public consultation
On 3 August 2022, the CBI published its response to the retail banking review public consultation. The CBI discussed the following in its response:
transitioning the banking ecosystem;
its regulatory approach;
revision of the retail conduct framework;
access to basic services
In particular, the CBI noted it will be carrying out proposed revisions to the CBI's Consumer Protection Code during the course of 2023 and 2024.
CBI reinforces consumer protection expectations of regulated financial firms providing direct debit services
On 28 July 2022, the CBI published a "Dear CEO" letter on consumer expectations as a result of the withdrawal of retail banks from the Irish market. The letter reinforces its consumer protection expectations of all regulated firms that also operate as Direct Debit Originators (DDOs). This follows a review of plans submitted from DDOs setting out the measures they are taking to support their customers through the large scale migration of customer bank accounts currently underway. The letter sets out specific CBI expectations of DDOs, including:
proactive identification of all affected customers who may need to take action and update their bank account details;
ensuring customer communications are effective in supporting customers to make informed decisions, including active reminders and ongoing monitoring of whether affected customers have taken action;
have measures in place to ensure continuity of service for customers who may be affected by direct debits that are returned unpaid;
have supports and resources in place for customers who are potentially vulnerable; and
ensuring they have sufficient and properly trained resources in place to deal with potential spikes in customer queries.
Commission Delegated Regulation supplementing the Capital Requirements Regulation (CRR)
On 11 August 2022, the European Commission published the Commission Delegated Regulation supplementing the CRR with regard to regulatory technical standards specifying the calculation methods of gross jump-to-default (JTD) amounts for exposures to debt and equity instruments and for exposures to default risk arising from certain derivative instruments, and specifying the determination of notional amounts of instruments other than the instruments referred to in Article 324w(4) of the CRR.
The delegated regulation sets out:
the determination of the components P&L long, P&L short, adjustment long and adjustment short for the calculation of gross JTD amounts for exposures to debt and equity instruments,
estimation of the gross JTD amounts for the exposures referred to in Article 325w(7) of the CRR
determination of notional amounts of instruments other than the instruments referred to in Article 325w(4) of the CRR
EBA consults on technical standards to help originator institutions determine the exposure value of synthetic excess spread in securitisations
On 9 August 2022, the EBA launched a public consultation on its draft regulatory technical standards on the determination by originator institutions of the exposure value of synthetic excess spread (SES) in securitisations. The Capital Markets Recovery Package (CMRP) amended the Capital Requirements Regulation (CRR) in several aspects, including a preferential treatment for senior tranches of simple, transparent and standardised (STS) on-balance-sheet securitisations. It also introduced a provision on how to determine the exposure value of SES in synthetic securitisations. The consultation paper sets out proposals that contribute to a more risk sensitive prudential framework in the area of synthetic securitisation. The consultation is open until 14 October 2022.
EBA updates data on deposit guarantee schemes across the EEA
On 4 August 2022, the EBA published 2021 extended data related to two key concepts and indicators in the Deposit Guarantee Schemes (DGSs) Directive:
available financial means (AFM), and
The EBA found that from 2020 to 2021, the amount of available financial means held by DGSs across the EEA significant increased by 19%. This means that DGSs hold more resources to protect depositors in case of banking failure. The EBA also found that DGSs are gradually increasing their funds raised from the industry with the aim of reaching the harmonised minimum target level of 0.8% of covered deposits by July 2024. The 2021 dataset includes, for the first time, some new metrics such as the amount of qualified available financial means of the DGSs, which are the funds counting toward reaching DGSs' target level.
EBA consults on revised guidelines on methods for calculating contributions to deposit guarantee schemes
On 29 July 2022, the EBA launched a consultation on the draft revised guidelines on methods for calculating contributions to deposit guarantee schemes (DGSs) under Directive 2014/49/EU. The EBA identified several elements of the calculation method that should be improved as part of its latest review of the guidelines in 2021-2022. The most substantial proposals are to:
set minimum thresholds for the majority of core risk indicators
adjust the minimum weights of the core risk indicators based on empirical evidence
replace the formula for determining the risk adjustment factor of each member institution to remedy an issue in the guidelines
specify how to account for deposits where the DGSs coverage is subject to uncertainty, including in relation to client funds
require DGSs to regularly review the calibration of the calculation method against prudential benchmarks, and
clarify the addressees of the guidelines and their respective roles.
The consultation is open until 31 October 2022. The final guidelines will be published after the consultation period.
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.