Financial Services Regulation and Compliance - General Cross Sectoral Apr 2022
Financial Services Regulation and Compliance - General Cross Sectoral Apr 2022
European Union (Bank Recovery and Resolution) Resolution Fund Levy Regulations 2022 [S.I. No. 190 of 2022]
On 22 April 2022, the European Union (Bank Recovery and Resolution) Resolution Fund Levy Regulations 2022 was published. The regulations set out the levy institutions, within the meaning of Regulation 166 of the European Union (Bank Recovery and Resolution) Regulations 2015, shall pay to the CBI for the account of the Bank and Investment Firm Resolution Fund. The regulations also sets out the reporting obligations of union branches and limited activity investment firms.
Consumer Protection (Regulation of Retail Credit and Credit Servicing Firms) Act 2022
On 11 April 2022, the President signed the Consumer Protection (Regulation of Retail Credit and Credit Servicing Firms) Act 2022 (Act No.5 of 2022). The Act is subject to a commencement order. The Act will require entities providing credit (directly or indirectly) through hire purchase agreements or consumer hire agreements to seek authorisation as a retail credit firm (RCF) from the CBI. Entities that service these agreements will need to be authorised as a credit servicing firm (CSF). RCFs and CSFs will be subject to the Consumer Protection Code 2012, the Minimum Competency Code 2017 and Minimum Competency Regulations 2017.
Amendments to the list of PCFs
On 8 April 2022, the CBI published the Central Bank Reform Act 2010 (Sections 20 and 22) (Amendment) Regulations 2022 which gives effect to new categories of Pre-Approved Control Functions (PCF) under its fitness and probity framework.
The regulations have split Non-Executive Directors into two categories:
PCF-2A Non-Executive Director
PCF-2B Independent Non-Executive Director
The regulations remove and replace the Head of Compliance with responsibility for Anti-Money Laundering and Counter Terrorist Financing Legislation (PCF-15) with either the existing Head of Compliance (PCF-12) or the new Head of Anti-Money Laundering and Counter Terrorist Financing (PCF-52). The regulations have also removed the category of Head of Investment (PCF-31), defaulting to Chief Investment Officer (PCF-30).
The regulations expanded branch managers of branches established outside the State (PCF-16) to include managers of non-EEA branches. The regulations have also amended all references to the 'Chairman' for roles relating to chairing of a board or committee to the 'Chair'.
Report on Pre-Legislative Scrutiny of the Central Bank (Individual Accountability Framework) Bill 2022
On 6 April 2022, the Joint Committee on Finance, Public Expenditure and Reform and Taoiseach published its Report on Pre-Legislative Scrutiny of the General Scheme of the Central Bank (Individual Accountability Framework) Bill 2021.
The committee is broadly supportive of the measures the general scheme proposes to introduce and proposes the following four recommendations:
the CBI report on the possible inclusion in the SEAR of the entities currently proposed to be excluded (credit unions, reinsurance/captive reinsurance undertakings and Insurance Special Purpose Vehicles) within one year of commencement of the Act
the Department of Finance should clarify if certain payment gateways (in respect of financial technology firms) are to be excluded from the SEAR
upon conclusion of the extensive consultation exercise with the financial services sector proposed, the CBI reports back to the Committee with any revisions or changes to the scheme based on the consultation
the Department clarify the intended meaning of "third country branches" of the RFSPs included in the SEAR
EBA calls on financial institutions and supervisors to provide access to the EU's financial system
On 27 April 2022, the EBA published a statement addressed to financial institutions and supervisors setting out what they can do to provide access to refugees from Ukraine to the EU's financial system. The EBA also sets out how its anti-money laundering and counter-terrorist financing (AML/CFT) guidelines apply in the current context, and how financial institutions can adapt their AML/CFT measures to provide a pragmatic and proportionate response to the compliance challenges they face. It also clarifies what financial institutions and supervisors can do to protect vulnerable persons from abuse by criminals and calls on financial institutions to ensure that compliance with the EU’s restrictive measures regime does not lead to unwarranted de-risking.
Fabio Panetta – For a few cryptos more: the Wild West of crypto finance
On 26 April 2022, Fabio Panetta, member of the Executive Board of the ECB, delivered a speech at Columbia University. In his speech, he addressed the rise of crypto-assets, policy concerns, financial stability risks and regulation. On the regulation of crypto-assets, he highlighted four areas of concern:
the need to hold crypto-assets to the same standards as the rest of the financial system
the taxation of crypto-assets
strengthening public disclosure and regulatory reporting requirements
standards of conduct to be followed by professional operators to protect retail investors and transparency requirements
Panetta noted Europe is leading the way in bringing crypto-assets into the regulatory purview with the finalisation of the Regulation of Markets in Crypto-Assets (MiCA) and the proposed regulation on information accompanying transfers of funds and certain crypto-assets (FCTR). He emphasised Europe's regulatory measures need to go further, such as focusing more on unbacked crypto-asset activities that are undertaken without service providers.
ESAs see recovery stalling amid existing and new risks
On 13 April 2022, the Joint Committee of the European Supervisory Authorities issued their report on risks and vulnerabilities in the EU financial system. The report highlights the increasing vulnerabilities and risks across the EU financial sector. In light of the risks and uncertainties, the report advises national competent authorities, financial institutions and market participants to take the following policy actions:
prepare for potential further detrimental implications stemming from geopolitical tensions and ensure compliance with the sanctions regimes implemented at the EU and global levels
prepare for a possible deterioration of asset quality in the financial sector
closely monitor potential further increases in yields and sudden reversals of risk on financial institutions and investors
supervisors should monitor risks to retail investors
financial institutions should further incorporate ESG considerations into their business strategies and governance structures
financial institutions should strengthen their cyber resilience measures and prepare for a potential increase in cyber-attacks and its consequences
Monetary policy and financial stability implications of central bank digital currencies
On 8 April 2022, Fabio Panetta, Member of the Executive Board of the ECB, delivered the opening speech at the IESE Business School Banking Initiative Conference on Technology and Finance. In his speech, Panetta discussed the risks of central bank digital currencies (CBDCs) to financial intermediation, potential effects in times of crisis, impact of CBDCs on the central bank's balance sheet and related frictions, the factors that could weaken, strengthen and speed up monetary policy transmission. Panetta noted while CBDCs have a number of potentially far-reaching implications for the monetary and financial system as a whole, careful design will be crucial to maximise the benefits of CBDCs and manage any unintended consequences.
European Commission launches EU Digital Finance Platform
On 8 April 2022, the European Commission launched an EU Digital Finance Platform intended to bring together innovative financial firms and supervisors in a joint effort to build the Single Market in digital finance. The platform aims to overcome fragmentation and support the scaling up of digital financial services across the Single Market. The platform will initially consist of two main building blocks:
an observatory offering interactive features such as a Fintech map, events and a section where users will be able to share relevant research material
a gateway which will act as a single access point to supervisors, with information about national innovation hubs, regulatory sandboxed and licensing requirements
The second phase of the platform will be launched in 2023 with new features to be added.
ESAs Publish Joint Annual Report for 2021
On 6 April 2022, the Joint Committee of the European Supervisory Authorities (EBA, EIOPA and ESMA – ESAs) published its 2021 Annual Report, providing a detailed account of its joint work completed over 2021. The main areas of cross-sectoral focus continued to be joint risk assessment, enhancement of consumer protection, development of the regulatory and supervisory frameworks for sustainable finance and securitisation. In addition, monitoring and contributing to the digital finance developments, supporting fintech scale up through innovation hubs and sandboxes as well as cyber security completed the work programme.
SFDR: Commission adopts disclosure rules on sustainable investments
On 6 April 2022, the European Commission published the regulatory technical standards (RTS) to be used by financial market participants when disclosing sustainability-related disclosure under the Sustainable Finance Disclosures Regulation (SFDR) (the requirements). The requirements specifies the exact content, methodology and presentation of the information to be disclosed. Financial market participants will be required to provide detailed information about how they tackle and reduce any possible negative impacts that their investments may have on the environment and society in general. The requirements are subject to scrutiny by the European Parliament and the Council and are scheduled to apply from 1 January 2023.
European Financial Stability and Integration Review 2022
On 4 April 2022, the European Commission published its European Financial Stability and Integration Review 2022. The report reviewed the economic recovery from the pandemic, key developments and systemic risks in the EU real estate section since the pandemic, and discussed the risks and opportunities posed by decentralised finance.
European Commission launches public consultation and publishes a call for evidence on a digital euro
On 5 April 2022, the European Commission launched a targeted consultation on a digital euro. The consultation will gather further evidence on the following issues:
users’ needs and expectations for a digital euro
the digital euro’s role for the EU’s retail payments and the digital economy
making the digital euro available for retail use while continuing to safeguard the legal
tender status of euro cash
the digital euro’s impact on the financial sector and the financial stability
application of anti-money laundering and counter terrorist financing (AML-CFT) rules
the privacy and data protection aspects
international payments with a digital euro
Stakeholders are invited to submit their response through the online questionnaire. The consultation will run until 14 June 2022.
The European Commission also published a call for evidence for an impact assessment on a digital euro for the EU. The call for evidence is open until 14 June 2022. The EC will then consider the information received and submit an impact assessment to the regulatory scrutiny board.
Consultation on the functioning of the ESG ratings market in the European Union and on the consideration of ESG factors in credit ratings
On 4 April 2022, the European Commission published a targeted consultation on the functioning of the ESG ratings market in the European Union and on the consideration of ESG factors in credit ratings. This consultation is targeted at ESG rating providers, credit rating agencies (CRAs), investors, companies, public authorities, civil society including NGOs, academics. The consultation aims to help the EC gain a better insight on the functioning of the market for ESG ratings, and better understand how CRAs incorporate ESG risks in their creditworthiness assessment. Responses will feed into an impact assessment which evaluates whether a possible policy initiative on ESG ratings and on sustainability factors in credit ratings is needed. The consultation closes on 6 June 2022.
EU Parliament: Cryptocurrency dangers and the benefits of EU legislation
On 1 April 2022, the European Parliament published an article on the dangers of cryptocurrency and the benefits of EU legislation. The article sets out the risks of crypto-assets for consumers, companies and markets, together with their environmental impact. The article further sets out the benefits of the new EU crypto-regulation (MiCA), which covers transparency, disclosure, authorisation and supervision of transactions and aims to provide legal certainty, support innovation, protect consumers and investors and ensure financial stability.
MiCA is currently the subject of tripartite discussions (between the EU Commission, Council and Parliament) and an agreed text is expected later this year.
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.