Financial Services Regulation and Compliance - Cross Sectoral and Other March 2024

Domestic

CBI publishes consultation paper and draft regulations and guidance on Consumer Protection Code review

On 7 March 2024, the Central Bank of Ireland (CBI) published a consultation paper on its review of the Consumer Protection Code 2012 (the CPC), together with two sets of draft regulations, which will replace the CPC once finalised, and two guidance documents. These legislative and guidance proposals not only represent a consolidation of consumer protection rules, but an expansion of these principles in terms of scope and details.

The consultation paper is the second of three steps the CBI is taking to modernise, clarify and integrate the CPC. The CBI has proposed new and enhanced requirements in the area of SME protections and indicated that it will undertake further work to consolidate the SME Regulations into the revised CPC.

The submission period for the consultation will remain open for three months, until 7 June 2024.

CBI Deputy Governor remarks on the launch of the CPC review

On 7 March 2024, the Deputy Governor of the CBI, Derville Rowland delivered a speech at the launch of the consultation paper on the review of the CPC.

Rowland outlined the importance of consumer protection in financial services, the evolution of the CBI’s approach to this, and the broader context of the review of the CPC and some of its key proposals. Rowland noted international developments in consumer protection led by the OECD and the need to support firms in their understanding and engagement with consumer protection obligations.

Rowland noted the CBI’s engagement programme with key stakeholders, which informed the proposals along with the CBI’s research, analysis and supervisory experience. She noted that the proposed CPC modernises the previous CPC approach and reflects the provision of financial services in a digital world with enhanced clarity and predictability for firms on their obligations.

Rowland noted that the CBI has proposed a 12 month implementation period for the CPC, following the final date of its publication and invited stakeholders and the public to share their views on the proposals during the interim period.

CBI publishes first quarterly bulletin of 2024

On 12 March 2024, the CBI published its first quarterly bulletin of 2024.

The bulletin noted that while the domestic Irish economy continued to grow in early 2024, the pace of growth was expected to be affected over the forecast horizon. The dominant influences on inflation have shifted to domestic factors and more persistent domestic price pressures are forecast to result in core inflation exceeding the projection for headline inflation out to 2026. Unemployment rates remain close to all-time lows despite a slowing in employment growth and nominal wage growth is forecast at 4.7% per annum from 2024-2026.

The CBI noted that risks to the growth outlook are tilted to the downside, with risks to the inflation outlook broadly balanced and the large supply-demand imbalances that characterised the economy in 2021 and 2022 had been gradually resolved.

The CBI did, however, note several risks could cause the economy to deviate from projections. These included the knock-on inflationary impact of geopolitical tensions on energy prices, a more protracted period of low growth in the global economy, increases in labour costs above productivity and delayed progress in addressing capacity constraints in housing and other infrastructure. The Irish economy would also be vulnerable to a downturn in the pharmaceutical or information and communications technology (ICT) sectors.

Central Bank of Ireland Fitness and Probity Review

On 8 March 2024, the CBI announced its decision to commission an independent review of the Fitness and Probity (F&P) approval procedure to ensure that it remains effective into the future.

This review follows the first successful appeal to the Irish Financial Services Appeals Tribunal of a CBI decision to refuse a pre-approval controlled function application.

The CBI has published its terms of reference for the review, which will be published in the third quarter of 2024. The objective of the review is to undertake an independent assessment of the manner in which the CBI exercises its statutory functions in relation to F&P and will consider the transparency, efficiency and effectiveness of the CBI's operation of the F&P regime, considering the purpose and objectives of the regime to support the safety and soundness of firms, threats to consumer and investor protection and the stability of the system overall.

On conclusion of the review, the reviewer will provide a report including recommendations to the Governor of the CBI.

CBI launches Climate Risk and Sustainable Finance Forum Working Group Report on Capacity Building

On 27 March 2024, the CBI launched the report from the Climate Risk and Sustainable Finance Forum’s (Climate Forum) Working Group on Capacity Building, which was established to assess the status of, and recommend action to accelerate, sustainable finance capability in Ireland’s financial services sector.

The Working Group on Capacity Building reviewed the existing evidence base, best practice at international level and a real economy survey of Irish financial market participants.

The report outlines nine overarching cross-sectoral recommendations including awareness raising at industry and consumer level, the development of a skills framework for each financial services sector, introductory and specialised courses by function and issue, the integration of ESG (environmental, social and governance) into pipeline courses and apprenticeships, education on the front line and government and new industry initiatives.

The Deputy Governor of the CBI, Sharon Donnery, noted that the CBI welcomed this report but that it did not represent CBI requirements or guidance, and was instead the work of the Climate Forum.

FSPO Overview of Complaints 2023

On 27 March 2024, the Financial Services and Pensions Ombudsman (FSPO) published its Overview of Complaints 2023 report (the report) providing an overview of those complaints received in relation to the financial services sector during 2023.

The FSPO received a record number of complaints in 2023, a 29% increase on 2022.This coincides with the Minister for Finance providing sanction for the FSPO to increase its workforce by 42%. The report also noted that there was a 12% increase in the number of complaints closed, with 5,184 complaints being closed in 2023. Mediation was central to the FSPO’s efforts to resolve complaints as early as possible, as the FSPO noted that many complaints could have been addressed by providers at an earlier time.

1,275 complaints achieved a mediation settlement with the value of those settlements totalling €2,943,493. A further €1,271,754 was paid to complainants by providers to settle complaints during the FSPO’s formal investigation process. The combined value of compensation directed in legally binding decisions following the formal investigation process was €321,330.

The majority of complaints were generated by the banking sector at 62%. The most complained conduct was customer service, at 24%, with maladministration second, at 20%, and disputed transactions third, at 15%.

Financial Services Industry Levy Regulations 2024

On 29 March 2024, the Financial Services and Pensions Ombudsman Act 2017 [Financial Services and Pensions Ombudsman Council] Financial Services Industry Levy Regulations 2024 (the 2024 Regulations) came into operation.

The 2024 Regulations specifies the annual charge that each financial service provider must pay to the FSPO.

Department of Justice publishes guidelines for designated persons supervised by the Anti-Money Laundering Compliance Unit

On 28 March 2024, the Anti-Money Laundering Compliance Unit (AMLCU) of the Department of Justice published its guidelines for designated persons supervised by the Anti-Money Laundering Compliance Unit (the guidelines).

These guidelines intend to assist designated persons (DPs) supervised by the AMLCU in understanding and meeting their anti-money laundering and countering the financing of terrorism (AML/CFT) obligations under the Criminal Justice (Money Laundering and Terrorist Financing) Act 2010, as amended.

The guidelines also include additional guidance for specific DPs in certain industries.

The AMLCU is welcoming feedback on the guidelines, with all feedback received prior to 30 June 2024 to be considered as part of its first review process that shall be completed within one year after publication.

European

ESMA launches third consultation under MiCA

On 25 March 2024, the European Securities and Markets Authority (ESMA) published its third consultation package under the Markets in Crypto Assets Regulation (MiCA).

The package seeks input on one set of regulatory technical standards (RTS) on the detection and reporting of suspected market abuse in crypto-assets and three sets of guidelines which deal with:

• policies and procedures, including the rights of clients, for crypto-asset transfer services
• suitability requirements for certain crypto-asset services and format of the periodic statement for portfolio management
• ICT operational resilience for certain entities under MiCA

Stakeholders are encouraged to provide their feedback by 25 June 2024. ESMA will publish a final report based on the feedback received and submit the draft technical standards to the Commission for endorsement by 30 December 2024.

ESMA finalises first rules on crypto-asset service providers

On 25 March 2024, ESMA published the first final report under MiCA, which aims to foster clarity and predictability, promote fair competition between crypto-asset service providers (CASPs) and a safer environment for investors across the Union.

The report includes proposals on:

• information required for the authorisation of CASPs
• the information required where financial entities notify their intent to provide crypto-asset services
• information required for the assessment of intended acquisition of a qualifying holding in a CASP
• how CASPs should address complaints

ESMA has submitted the final report to the Commission and will provide further advice and technical guidance in this area if requested by the Commission.

Final report on technical standards on cooperation between competent authorities, ESAs and third country authorisations under MiCA

On 25 March 2024, ESMA published its final report on draft RTS and implementing technical standards (ITS) specifying requirements on cooperation between competent authorities, the European Supervisory Authorities (ESAs) and third country authorisations under MiCA.

The report contains draft RTS specifying the information to be exchanged between competent authorities and on the cooperation template with third countries respectively. The report also contains draft ITS specifying the relevant standard forms, templates and procedures for the exchange of information between competent authorities and on forms for information exchange between competent authorities and ESMA or the European Banking Authority (EBA).

ESMA will submit the final report and draft RTS and ITS to the Commission which will have three months to decide whether to adopt the technical standards. This period may be extended by one month.

EBA consults on guidelines on redemption plans for issuers of ARTS and EMTs

On 8 March 2024, the EBA launched a consultation on the guidelines for the plans to orderly redeem asset-referenced tokens (ARTs) or e-money tokens (EMTs) in the event that the issuer fails to fulfil its obligations under MiCA.

The guidelines specify the content of the redemption plan, the timeframe for review and the triggers for its implementation and are addressed to issuers of ARTs and EMTs and to competent authorities under MiCA.

The draft guidelines:

• clarify the main principles governing the redemption plan, such as the equitable treatment of token holders
• describe the main steps for the orderly and timely implementation of the plan, including the communication plan, the content of the redemption claims and the distribution plan
• cover the case of pooled issuance, where the same token is issued by multiple issuers
• outline the triggers for the activation of the plan by the competent authority and the cooperation with the prudential and resolution authorities

The consultation runs until 10 June 2024.

EBA publishes final draft technical standards on complaints handling for issuers of asset referenced tokens

On 13 March 2024, the EBA published the final draft RTS setting out the requirements, templates and procedures for handling complaints received by issuers of ARTs.

The draft RTS fulfil the EBA’s mandate under MiCA and were developed in close cooperation with ESMA.

The draft RTS set out requirements related to the complaints management policy and function, the provision of information to holders of ARTs and other interested parties, templates, recordings, languages, the procedure to investigate complaints and to communicate the outcome of the investigations to complainants, and specific provisions for complaints handling involving third-party entities.

The RTS will enter into force 20 days after its publication in the Official Journal.

EBA issues revised list of validation rules

On 22 March 2024, the EBA issued a list of validation rules in its ITS on supervisory reporting, highlighting those which have been deactivated either for incorrectness or for triggering IT problems.

The EBA has informed competent authorities across the EU that data submitted in accordance with these ITS should not be formally validated against the deactivated rules.

EBA launches call for papers for its 2024 Policy Research Workshop

On 25 March 2024, the EBA launched a call for papers in view of its 13^th Policy Research Workshop titled ‘Boundaries of Banking Regulation’, scheduled to occur on 6-7 November 2024.

The workshop aims to connect experts, as well as academics, to consider policies that can ensure innovation in a context of competition and risk arbitrage, while ensuring financial stability. The EBA has invited the submission of policy-oriented and empirical research papers on topics covering:

• Implications of the growing role of non-bank financial intermediaries for loan origination standards, access to finance for riskier borrowers and for the stability of credit supply over the business cycle.
• Maturity transformation intermediated by asset management firms, including private equity and hedge funds, non-bank finance firms and the use of security markets.
• Links between non-supervised and supervised financial entities and potential financial stability implications of failures of non-bank financial firms.
• Importance of regulatory supervision for non-bank systemically important financial institutions (SIFIs).
• Development of digital technologies, regulatory challenges and responses.

The deadline for the submission of papers is 5 July 2024.

Proposed update to the list of high-risk third countries under AMLD4

On 14 March 2024, the Commission adopted a delegated Regulation to amend the list of high-risk third countries with strategic AML/CFT deficiencies pursuant to its powers under the fourth Anti-Money Laundering Directive (AMLD4).

The delegated Regulation will amend the Annex to Delegated Regulation (EU) 2016/1675 to:

• add Kenya and Namibia to the list of high-risk third countries under AMLD4
• remove Barbados, Gibraltar, Panama, Uganda and the United Arab Emirates

The draft delegated Regulation will be submitted to the Council and Parliament for scrutiny and if neither objects, will enter into force 20 days after it is published in the Official Journal.

EU leaders call for Capital Markets Union’s faster implementation

On 22 March 2024, the Euro Summit adopted a statement calling on EU Member States and EU institutions to speed up the implementation of the proposed capital markets union (CMU). This meeting was conducted in an inclusive format, with the participation of the leaders of EU Member States outside the eurozone.

The statement underlined the Euro Summit’s determination to increase the resilience and competitiveness of the EU economy. The Euro Summit invited the Eurogroup to closely monitor economic and fiscal developments, as continued close coordination of Member States’ economic policies will be instrumental to the consistent and effective implementation of the reform of the EU economic governance framework.

The Euro Summit noted its determination to ‘urgently speed up’ the deepening of the CMU and called for:

• the Parliament and the Council to ensure the rapid completion of the outstanding legislative work on the 2020 CMU action plan
• all Member States and EU institutions to take work forward, with a view to ensuring the swift implementation of all the measures outlined in the statement of the Eurogroup in inclusive format on the future of the CMU
• the Eurogroup to regularly take stock of the performance and evolution of European capital markets and report on the progress of the identified measures  

European Commission adopts three sets of RTS on DORA

On 13 March 2024, the Commission announced that that it had adopted three draft Commission delegated Regulations containing draft RTS to complement the EU regulatory frameworks on cybersecurity matters for the financial sectors.

The draft RTS specify rules to:

• classify ICT-related incidents and cyber incidents via materiality thresholds and the details of reports of major incidents
• harmonise ICT risk management tools, methods, processes and security policies for financial entities, including the simplified ICT risk management framework
• establish the elements of risk that financial entities must take into account when developing their policy on the use of ICT services supporting critical or important functions provided by ICT third-party service providers

The Parliament and Council will now scrutinise the acts with a view to adoption.

For more information on these topics please contact any member of A&L Goodbody's Financial Regulation Advisory team.

Date published: 22 April 2024