Financial Services Regulation and Compliance - Cross Sectoral July 2019

DOMESTIC

Central Bank updates Q&As for the Transparency Regulatory Framework

On 22 July 2019, the Central Bank updated its Q&As relating to the Transparency (Directive 2004/109/EC) Regulations 2007 in relation to the necessity to publish a notice or distribute a circular concerning dividends on ordinary shares in certain circumstances.  

Speech by Acting Governor of the CBI Sharon Donnery on Brexit

On 22 July 2019, Acting Governor of the CBI Sharon Donnery gave a speech to the MacGill Summer School. In her speech the Acting Governor discussed several issues facing the Irish economy, including:

  • the economy needs to be resilient to the risks associated with strong domestic growth as well as those from external threats
  • a disorderly Brexit is one of the main risks to the economy; and
  • strong domestic economic performance could indicate an increased risk of an overheating economy.

CBI issues Guidance in accordance with the Prospectus Regulation

On 23 July 2019, the CBI issued Submission Templates and Guidance on their website under the Prospectus Regulation in relation to the following:

  • submitting a debt submission template
  • how to submit a Final Terms Submission Form
  • Submission Process
  • Passporting
  • Payment Prospectus Approval Fees
  • Supplements and Financial Supplements
  • Transfer of Approval; and
  • Omission of Information.

The Prospectus Regulation has now commenced, with the Regulation applying in its entirety across the EU from 21 July 2019.

CBI publishes Feedback Statement on CP121

On 15 July 2019, the CBI published its feedback statement on CP121 – Consultation on amendments to CBI Market Abuse and Transparency Rules and consolidation into Central Bank (Investment Market Conduct) Rules. This feedback statement briefly summarises two responses received to CP121 and welcomes respondent's support for its initiatives, which include the introduction of a requirement to obtain an LEI for certain issuers.

EUROPEAN

EU Commission sets out its equivalence policy with non-EU countries

On 29 July 2019, the EU Commission set out its equivalence policy for non-EU countries. The EU examines to what extent the regulatory regimes of a given third country achieves the same outcomes as its own rules. A positive decision allows EU authorities to rely on third-country rules and supervision, allowing third-country market participants to comply with only one set of rules. This communication deals with 2 areas:

  • the EU's comprehensive approach and legislative improvements relating to how the EU Commission grants equivalence to non-EU countries; and
  • an overview of how recent EU legislative changes have strengthened the equivalence framework.

Results of the June 2019 survey on credit terms and conditions in euro-denominated securities financing and over-the-counter derivatives markets

On 31 July 2019, the ECB published the results of its survey on credit terms and conditions in the euro-denominated securities financing and over-the-counter derivatives markets. The survey collected data from 28 large banks, 14 with headquarters inside the euro area and 14 outside the euro area.

The survey found that, between March and May 2019:

  • credit terms eased for almost all counterparties in the securities financing and over-the-counter derivatives markets
  • the maximum amount of funding collateralised with euro-denominated securities declined; and
  • demand for funding continued to decline across all types of collateral.

Regulation (EU) 2019/1150 of the European Parliament and of the Council of 20 June 2019 on promoting fairness and transparency for business users of online intermediation services published

On 11 July 2019, Regulation (EU) 2019/1150 on promoting fairness and transparency for business users of online intermediation services was published in the Official Journal. The Regulation aims to establish a legal framework that guarantees transparent terms and conditions for business users of online platforms in order to ensure a fair online business environment within the internal market. The online platforms covered by the Regulation include online market places, online software application stores, online social media and online search engines. Regulation (EU) 2019/1150 will enter into force on the 31 July 2019, and will apply from 12 July 2020.

ESMA publishes report on the licencing of FinTech firms across Europe

On 12 July 2019, ESMA published a report on the licencing of FinTech firms across Europe. The report is based on two surveys which collected answers from NCAs on the licensing of FinTech firms in their jurisdictions.

ESMA’s key findings from the surveys are that:

  • regulatory gaps exist in relation to crypto-assets, initial coin offerings and distributed ledger technologies
  • there is a  need for greater clarity around the governance and risk management processes of both cyber security and cloud outsourcing
  • there is a direct link between the innovation facilitators and authorising approaches for innovative FinTech business models; and
  • there is an ongoing discussion as to the need for an EU wide holistic crowdfunding regime, particularly for crowdfunding based on non-MiFID II instruments.

ESMA concluded that at present most innovative business models can operate within the existing EU rules.

EBA publishes report on Fintech activities

On 19 July 2019, the EBA published its findings on the regulatory framework applicable to FinTech firms when accessing the market.

The report examines three areas:

  • the developments on the regulatory perimeter across the EU
  • the regulatory status of FinTech firms; and
  • the approaches followed by competent authorities when granting authorisation for banking and payment services.

The national regulatory status of FinTech firms with innovative business models or delivery mechanisms shows two developments:

  1. the shift from non-regulated to regulated activities; and
  2. the ancillary/non-financial nature of the services provided by FinTech firms not subject to any regulatory regime.

The EBA found that proportionality and flexibility principles are applied in the same way by competent authorities irrespective of whether the firm presents a traditional or innovative business model and/or delivery mechanism. The EBA plan to carry out additional monitoring going forward with a view to better assessing the specificities of the national special regimes.

ESMA update Single Rulebook Q&A - Directive 2015/2366/EU (PSD2)

On 19 July 2019, ESMA updated its Q&As regarding Directive 2015/2366/EU (PSD2). The update answered three questions, relating to:

  • liability for fraud when the Strong Customer Authentication (SCA) exemption is used
  • responsibility for comprehensive assessment according to Article 95(2) PSD2; and
  • Confidentiality of offline PIN numbers.

ESMA launches consultation on disclosure guidelines under the Prospectus Regulation

On 15 July 2019, ESMA launched a public consultation on its draft Guidelines on disclosure requirements under the Prospectus Regulation. ESMA is seeking stakeholders’ views on the draft Guidelines, which exist to ensure that market participants have an understanding of the relevant disclosure requirements and will provide NCAs with information for prospectuses. The Guidelines cover a number of topics including historical financial information and working capital statements. The consultation period closes on 4 October 2019, and ESMA will use the feedback received to finalise the draft Guidelines.

ESMA publishes the 23rd extract from the EECS database

On 16 July 2019, ESMA published an extract from its confidential database of enforcement decisions on financial statements. The extract includes eight decisions taken by national enforcers in the period from December 2016 to December 2018. These decisions cover several topics, including presentation of the statement of cash flows, impairment of financial and non-financial assets as well as accounting treatment of leased-out property acquired for re-development. The publication of enforcement decisions informs market participants about which accounting treatments European national enforcers may consider as complying with IFRS. ESMA will regularly publish extracts from the database, with the next extract planned for early 2020.

ESMA advises on credit rating sustainability issues and sets disclosure requirements

On 18 July 2019, ESMA published its technical advice on sustainability considerations in the credit rating market. ESMA assessed the level of consideration of environmental, social and governance (ESG) factors in both specific credit rating actions and the credit rating market as a whole. ESMA found that although credit rating agencies are considering these factors in their ratings, the extent of these considerations can vary across asset classes. ESMA proposed that the European Commission assesses whether there are sufficient regulatory safeguards in place for other products that will meet the demand for pure sustainability assessments.

ESMA also released its final guidelines on disclosure requirements applicable to credit ratings. These guidelines, issued to Credit Rating Agencies (CRAs), are intended to improve the overall quality and consistency of CRAs’ press releases relating to their rating activity.

The guidelines provide:

  • guidance as to what CRAs should disclose when they issue a credit rating; and
  • require greater transparency around whether ESG factors were a key driver of the credit rating action.

ESMA updates its Q&As relating to the Prospectus Regulation

On 12 July 2019, ESMA updated its Q&As relating to Regulation (EU) 2017/1129 with 25 new Q&As. 22 of these are updated to reflect the prospectus regulation, while three provide clarity on the following issues related to the Regulation:

  • the application of Article 23(3) in relation to issuers that qualify as financial intermediaries; and
  • continuing an offer which has initially been made using a base prospectus approved under the Directive after the Regulation has entered force.

ESMA updates its Q&As regarding the BMR

On 11 July 2019, ESMA updated its Q&As regarding the BMR. The update answered two questions, confirming that:

  • the €STR is not based on contributions of input data as defined in Article 3(1)(8); and
  • the scope of the definition of commodity benchmarks for the purposes of BMR is not identical to the scope of the definition of commodity derivatives for the purposes of MiFID II/MiFIR.

ESAs publish recommendations on the supervision of retail financial services provided across borders

On 9 July 2019, the Joint Committee of the ESAs (EBA, EIOPA and ESMA) published a report on the cross-border supervision of retail financial services. The ESAs identified the main issues that NCAs face when supervising financial institutions that provide cross-border retail financial services within the EU. The report then goes on to make recommendations to both NCAs and EU institutions on how to address these issues, including through new or amended legislation.

EBA assesses impact of FinTech on payment institutions' and e-money institutions' business models

On 8 July 2019, the EBA published a report on the impact of FinTech on payment institutions' and electronic money institutions' business models. The report lays out the EBA's key observations on PIs' and EMIs' strategies and business model changes, in particular focusing on the:

  • current trends and drivers
  • different approaches to FinTech
  • interactions with big FinTech firms; and
  • level of implementation of innovative technologies.

The report does not intend to model scenarios for the potential future development of institutions. It aims to share knowledge and provide support to supervisors in understanding the main trends that could impact PIs' and EMIs' business models in the future and pose potential challenges to their sustainability.

For more information on this topic please contact any member of A&L Goodbody's Financial Regulation team.

Date published: 9 August 2019