Financial Services Regulation and Compliance - General Cross Sectoral Dec 2021
Domestic
CBI publishes its cross industry guidance on operational resilience and feedback statement
On 1 December 2021, the Central Bank of Ireland (CBI) published its cross industry guidance on operational resilience together with a feedback statement (the guidance). The guidance outlines the CBI's proposed approach to how the financial sector should prepare for, respond and adapt to, recover and learn from, an operational disruption that affects the delivery of critical or important business services.
The guidance sets out the responses received following the CBI's engagement with relevant stakeholders. The guidance also notes that the main themes within the responses included proportionality, governance and board ownership and critical or important business services. The guidance is largely unchanged from the draft guidance consulted upon.
In terms of next steps, the CBI's expects that the boards and senior management of regulated firms adopt appropriate measures to strengthen and improve their operational resilience frameworks and their effective management of operational resilience. Firms will be expected to actively and promptly address operational resilience vulnerabilities and be in a position to evidence proposed plans to apply this guidance within two years of it being issued.
CBI publishes cross industry guidance on outsourcing and feedback statement
On 17 December 2021, the CBI issued its cross industry guidance on outsourcing (guidance), which applies to all regulated firms that use outsourcing as part of their business model.
The publication follows its consultation on a draft form of the guidance. The guidance is supplemental to existing legislation, regulation and guidance on outsourcing, with the CBI emphasising that sectoral legislation, requirements or guidance will take precedence over this guidance.
The guidance came into effect immediately on its publication. Boards and senior management should review the guidance and consider it in light of their own firms' outsourcing risks. However, the CBI does note in the feedback statement that its application of the guidance will consider the adjustments firms will need to make relative to the nature, scale and complexity of outsourcing the firm uses in its business model.
Additionally, the CBI confirmed that template notifications for each sector will be published on the CBI's website during Q1 2022 and the submission of outsourcing registers, as required under the guidance, will be required from Q2 2022, with reasonable notice provided to firms in advance of submission deadlines.
CBI publishes new market-based finance monitor
The CBI has published the market-based finance monitor, a new publication which aims to monitor activities and balance sheet trends in the Irish market-based finance sector that could point to potential financial vulnerabilities. This forms one element of the CBI’s broader priority to safeguard the resilience of this growing form of financial intermediation, including by contributing to international initiatives to enhance the regulatory framework for market-based finance and develop a macroprudential perspective in the regulation of the sector.
Market-based finance refers to the raising of debt or equity through financial markets, rather than through the banking system. The sector has grown rapidly in recent years and has become a central part of the international financial system.
European
EBA publishes consultation paper on draft regulatory technical standards for crowdfunding service providers
On 8 December 2021, the EBA began consulting on draft regulatory technical standards (RTS) specifying the information that crowdfunding service providers must provide to investors under Article 19(7) of the Regulation on European Crowdfunding Service Providers (ECSPR).
The draft RTS specify:
- the elements, including the format, that are to be included in the description of the method to calculate credit scoring and to suggest loan pricing
- the information and factors that crowdfunding service providers need to consider when carrying out a credit risk assessment and conducting a valuation of a loan
- the factors that a crowdfunding service provider must consider when ensuring that the price of a loan it facilitates is fair and appropriate
- the minimum contents and governance of the policies and procedures required for information disclosure and of the risk-management framework for credit risk assessment and loan valuation
The deadline for comments is 8 March 2022. After considering feedback, the EBA expects to submit the draft RTS to the EC in May 2022.
"Macroprudential policy in Europe – the future depends on what we do today" – Remarks by Christine Lagarde at the Fifth Annual Conference of the European Systematic Risk Board
On 8 December 2021, President of the ECB and Chair of the European Systemic Risk Board (ESRB), Christine Lagarde, gave the welcoming remarks at the fifth annual conference of the ESRB.
President Lagarde's speech focused on the two primary threats to financial stability; climate change and cyber incidents.
In relation to climate change, President Lagarde highlighted the importance of collective effort required within the financial sector to combat this threat. In particular, Lagarde identified the need for the sector to channel resources to finance the transition to a more sustainable economy.
On cyber incidents, President Lagarde examined the fundamental role that technology plays in the financial sector, and how cyber incidents pose a systematic risk. In the event of a cyber incident threatening the financial system, a coordinated and swift response will be essential to preserve confidence and re-establish reliable information.
EBA publishes consultation paper on new remote customer onboarding guidelines
On 8 December 2021, the EBA launched a public consultation on its draft guidelines on the use of remote customer on boarding solutions.
The draft guidelines set common EU standards on the development and implementation of sound, risk-sensitive initial customer due diligence policies and processes in the remote customer onboarding context. The guidelines set out the steps financial institutions should take when choosing remote customer onboarding tools and when assessing the adequacy and reliability of such tools, in order to effectively comply with their AML/CFT obligations. These guidelines have been developed in response to the European Commission’s request (in consultation with the other European Supervisory Authorities (ESAs)) in the context of its Digital Finance Strategy, published in 2020.
The consultation period runs until 10 March 2022. There will be a virtual public hearing on 24 February 2022.
European Commission (EC) publishes the Delegated Regulation (EU) 2021/2178 supplementing Article 8 of the Taxonomy Regulation
On 10 December 2021, the EC published the Commission Delegated Regulation (EU) 2021/2178 (the Delegated Regulation) in the Official Journal of the European Union. The Delegated Regulation specifies the content and presentation of information to be disclosed by undertakings subject to Article 19a or 29a of Directive 2013/34/EU concerning environmentally sustainable economic activities. The Delegated Regulation also specifies the methodology to comply with the disclosure obligations. It supplements the Taxonomy Regulation on the establishment of a framework to facilitate sustainable investment.
The Delegated Regulation will enter into force from 30 December 2021 and will apply from 1 January 2022 to a limited extent, with the remaining provisions applying from 1 January 2023 for non-financial undertakings and from 1 January 2024 for financial undertakings.
The ECB Governing Council publishes its monetary policy decisions
On 16 December 2021, the Governing Council of the ECB published its monetary policy decisions.
The Governing Council (GC) comprises the members of the Executive Board and the Governors of the national central banks participating in the euro area and is the primary decision-making body of the ECB.
The GC judged that the progress on economic recovery and towards our medium-term inflation target permits a step-by-step reduction in the pace of its asset purchases over the coming quarters. But monetary accommodation is still needed for inflation to stabilise at the 2% inflation target over the medium term. The following decisions were adopted by the GC:
- Conduct net asset purchases under the pandemic emergency purchase programme (PEPP) at a lower pace than in the previous quarter. Net asset purchases under the PEPP will be discontinued at the end of March 2022. Additionally, the reinvestment horizon for the PEPP will be extended until at least the end of 2024.
- Under the asset purchase programme (APP), the GP set a monthly net purchase pace of €40bn for the second quarter and €30 billion for the third quarter. From October 2022 onwards, the GC will maintain net asset purchases under the APP at a monthly pace of €20bn for as long as necessary to reinforce the accommodative impact of its policy rates.
- The interest rate on the main refinancing operations and the interest rates on the marginal lending facility and the deposit facility will remain unchanged at 0.00%, 0.25% and -0.50% respectively.
- The maturing of operations under the third series of target longer-term refinancing operations (TLTRO III) and bank funding conditions will continue to be monitored to ensure these do not hamper the smooth transmission of monetary policy. The special conditions applicable under TLTRO II are set to end in June 2022.
The GC confirmed it is prepared to adjust all of its instruments, as appropriate and in either direction, to ensure that inflation stabilises at its 2% target over the medium term.
EBA publishes revised guidelines on risk-based approach to AML/CFT supervision
On 16 December 2021, the EBA published its revised guidelines on risk-based supervision of credit and financial institutions’ compliance with anti-money laundering and countering the financing of terrorism (AML/CFT) obligations.
The revised guidelines replace the initial guidelines published in 2016. The guidelines set out the steps supervisors should take to ensure adequate AML/CFT oversight of their sector and support the adoption, by credit and financial institutions, of effective ML/TF risk management policies and procedures. The revised guidelines build on the existing four-step approach to the risk-based AML/CFT supervision and provide additional guidance on ML/TF risk assessments, including the sectoral risk assessment.
Upon entry into force, the guidelines will foster greater convergence of supervisory practices across the EU and, as a result, will contribute to further strengthening Europe’s AML/CFT defences before the new legal framework enters into force.
For more information on these topics please contact any member of A&L Goodbody's Financial Regulation team.
Date published: 18 January 2022