Financial Services Regulation and Compliance - General Cross Sectoral April 2023

Domestic

The Individual Accountability Framework and the Senior Executive Accountability Regime

On 19 April 2023, Minister for Finance Michael McGrath signed an Order to commence the Central Bank (Individual Accountability Framework) Act 2023 (IAF Act) with immediate effect except for Part 2 and Part 3 (Section 10). The sections commenced will, among other things, provide for:

  • Enhancements to the operation of the Central Bank of Ireland (CBI) Fitness & Probity (F&P) regime, in particular to the CBI's enforcement powers, making it more efficient, more effective, and ensuring it continues to conform to the required standards of fairness.
  • Extension of the F&P regime to certain categories of holding companies.
  • Amendments to the Central Bank Act 1942, in particular in relation to the administrative sanctions procedure. These amendments will clarify the processes involved in the procedure and adapt it to provide for enhanced individual accountability.

Deputy Governor Derville Rowland recently stated that the CBI intends to launch a separate public consultation on the changes to the ASP in mid-2023. This consultation package will include consolidated end-to-end ASP guidance which will include investigation, inquiry, settlement and sanctions guidance for consideration by all relevant stakeholders.

General Scheme of FSPO Bill published

On 11 April 2023, the Minister for Finance Michael McGrath published the General Scheme of the Financial Services and Pensions Ombudsman (Amendment) Bill (the Bill). The Bill intends to safeguard the consumer protections and access to the Financial Services and Pensions Ombudsman (FSPO) for customers of financial service providers who have left the Irish market. Following a recent Supreme Court decision (Zalewski case) regarding the Workplace Relations Commission and its quasi-judicial role, the Bill when enacted will also introduce legislative amendments to give effect to these changes.

Central Bank publish Draft Guidance on the updated Individual Questionnaire Application

The CBI has recently published draft guidance on the updated individual questionnaire application and an accompanying new fitness and probity individual questionnaire template in advance of the change of procedure and roll out of a new CBI portal which went live on 24 April 2023.

Updates to the CBI’s fitness and probity enforcement procedures

Part 3 of the Central Bank Reform Act 2010 has been amended by the Central Bank (Individual Accountability Framework) Act 2023 (the IAF Act) which were commenced on 19 April 2023. The CBI can now investigate an individual who formerly performed a controlled function (CF) role provided that they performed the role within the shorter of the following periods: (a) the period since 19 April 2023 (the commencement date of the relevant statutory provision), and (b) the six years before the date on which an investigation is commenced. The amendments to Part 3 of the 2010 Act are part of a suite of changes that are being introduced in order to give effect to the individual accountability framework (the IAF). As a result, the CBI has published updated regulations – the Central Bank Reform Act 20101 (Procedures Governing the Conduct of Investigations) Regulations 2023 which will apply from 20 April 2023

Fitness and probity investigations, suspensions and prohibitions guidance

The CBI published fitness and probity investigations, suspensions and prohibitions guidance and an accompanying guide to transitional arrangements arising from the IAF Act 2023. The transitional guidance explains the changes and describes the CBI's updated procedures. Where an investigation or related procedure was ongoing on the commencement date, having begun before that date, the changes made by the IAF Act do not apply to it. However, certain exceptions to this general rule are set out in Part 7 of the IAF Act. The CBI has issued updated regulations and guidance on fitness and probity enforcement procedures to take account of the changes introduced by the IAF Act 2023. They will apply from 20 April 2023.

An industry letter was published by the CBI on 21 April 2023, outlining the updated procedures for fitness and probity investigations, suspensions and prohibitions.

Minister McGrath response to CBI's Consumer Protection Code Review

On 11 April 2023, Minister McGrath wrote to Governor Mahklouf regarding the CBI’s Consumer Protection Code Review. Minister McGrath believes that the review of the code is timely in light of the changing financial services landscape and the challenging circumstances facing many consumers in terms of the cost of living. It is a key priority for the Minister to ensure that the regulatory framework supports borrowers in the switching process as they seek to minimise their borrowing costs. In his letter, Minister McGrath highlights the importance of addressing vulnerability and affordability in the Review.

CBI contact details for supervisory queries updated

From Monday, 3 April 2023, the email address FSPMailbox@centralbank.ie should be used for CBI queries of a supervisory nature. As of COB 31 March 2023, the FSPsupervision@centralbank.ie mailbox will not to be monitored and the mailbox will be discontinued as a supervision mailbox.

European

Progress on the investigation phase of a digital euro – third report

On 24 April 2023, the ECB published a third report presenting further progress made during the investigation phase of the digital euro project. The report contains the Eurosystem’s views on digital euro access, holdings and onboarding, as well as distribution aspects and digital euro services and functionalities. In the second quarter of 2023, the European Commission intends to propose a regulation to establish a digital euro.

The Eurosystem's proposal is to make the digital euro available to euro area residents, merchants and governments in its initial releases. Non-resident euro area citizens may also have access, provided they could have an account relation with a euro area PSP. Access for consumers in the wider European Economic Area (EEA) and selected third countries could be part of the subsequent releases. Individuals would be subject to uniform holding limits, which would cover day-to-day payments in each euro area Member State.

Single Rulebook Q&A - Regulation (EU) No. 575/2013 (CRR / CRD - CRR2 / CRD5) (updated 21 April 2023)

On 21 April 2023 several new Q&As relating to Article 430 were published to the Single Rulebook Q&A Regulation (EU) No. 575/2013 (CRR / CRD - CRR2 / CRD5. These new Q&As relate to updates of various templates including:

  • C 34.02
  • C 14.01
  • C 08.07
  • C 14.00 columns 0302 and 0303
  • C 34.08

ECB welcomes the EPI’s progress on building a European payment solution

On 25 April 2023, the ECB welcomed the announcement by the European Payments Initiative (EPI) of new shareholders and planned acquisitions for building an instant payment solution in Europe. With this step, in 2023-24 the EPI is proceeding with the launch of a digital wallet solution based on instant account-to-account payments, under a single brand and covering multiple use cases.

Proposal for a Regulation of the European Parliament and of the Council laying down measures to strengthen solidarity and capacities in the Union to detect, prepare for and respond to cybersecurity threats and incidents (COM(2023) 209 final / 2023/0109 (COD)) (Cyber Solidarity Act)

On 18 April 2023, the Cyber Solidarity Act was published to improve the preparedness, detection and response to cybersecurity incidents across the EU. The EU Cyber Solidarity Act aims to strengthen capacities in the EU to detect, prepare for and respond to significant and large-scale cybersecurity threats and attacks. The proposal includes a European Cybersecurity Shield, made of Security Operation Centres interconnected across the EU, and a comprehensive Cybersecurity Emergency Mechanism to improve the EU’s cyber posture.

The European Commission has adopted its tenth package of sanctions against Russia

The EU has adopted its tenth package of sanctions against Russia with immediate effect. The package contains new listings, trade and financial sanctions, including further export bans and import bans. It steps up enforcement and anti-circumvention measures, including a new reporting obligation on Russian Central Bank assets and reporting obligations on frozen assets (including for dealings before listings) and assets which should be frozen. There is an obligation to report more detailed information to NCAs, which in turn report it to the Commission. This enhanced reporting obligation applies from 26 April 2023. 

ESAs call for vigilance in the face of mounting financial risks

On 25 April, ESAs issued their Spring 2023 Joint Committee Report on risks and vulnerabilities in the EU financial system. While noting that EU financial markets remained broadly stable despite the challenging macro environment and recent market pressure in the banking sector, the ESAs are calling on national supervisors, financial institutions and market participants to remain vigilant in the face of mounting risks. The Joint Committee of the ESAs advises national supervisors, financial institutions and market participants to take a number of policy actions including, but not limited to:

  • remaining prepared for a deterioration in asset quality and supervisors should keep a close eye on loan loss provisioning
  • impact of policy rate increases and sudden rises in risk premia on financial institutions and market participants should be considered and accounted for in (liquidity) risk management
  • liquidity risks arising from investments in leveraged funds and the use of interest rate derivatives should be monitored closely
  • monitor the impacts of inflation risk
  • banks should pursue prudent capital distribution policies to ensure their long-term financial resilience given the uncertain medium-term outlook for profitability
  • implementing the finalisation of Basel III in the EU without delay and with as little deviation as possible, and by avoiding further deviations from EIOPA’s advice on the Solvency II review
  • risk management capabilities and disclosures for environmental, social and governance (ESG) risks should be enhanced as these risks are increasingly becoming a source of financial risk
  • financial institutions should allocate adequate resources and skills to ensure the security of their information and communication technology (ICT) infrastructures and adequate ICT risk management

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

Date published: 15 May 2023