Financial Services Regulation and Compliance - General Cross Sectoral Nov 2019
Financial Services Regulation and Compliance - General Cross Sectoral Nov 2019
Central Bank launches guidance on enforcement sanctions
The Central Bank of Ireland (CBI) has published a new guide to sanctions imposed under the Administrative Sanctions Procedure (ASP) for the financial services sector. The CBI states the aim of the guidance is to increases transparency by providing greater clarity on its general approach to sanctioning of firms and individuals. It provides guidance on the application of a variety of factors relevant to sanctioning under the ASP, including cooperation, self-reporting and remediation.
“Economic resilience needed to meet transitions ahead” - Governor Makhlouf
In his first keynote speech since being appointed Governor of the CBI, Gabriel Makhlouf set out the key challenges, risks and transitions which Ireland faces. Speaking to students and staff at the Waterford Institute of Technology, and the Chamber of Commerce, Governor Makhlouf highlighted the vulnerability of the Irish economy, particularly in the context of Brexit and the risk of escalating trade wars. While acknowledging the substantial improvements in resilience made over the last decade, citing reductions in public and private sector indebtedness, he identified four key transitions which pose challenges to the Irish people, these being Brexit, Climate change, the pace of technological change and profound changes which are taking place in the financial system.
A consumer focused culture in financial services firms
Gráinne McEvoy, Director of Consumer Protection, CBI in a recent speech stated that the CBI is increasingly focussed on conduct regulation with the aim of ensuring that the best interests of consumers and investors are protected. It uses sectoral risk analysis to identify the risks faced by consumers and to prioritise the regulatory and supervisory actions it will take drawing on, amongst other things:
analysis of consumer data submitted by firms
external and internal market research and analysis
developments at a European and international level
advice from the Consumer Advisory Group (which advises the CBI on the performance of its functions)
engagement with stakeholders, including consumer groups, statutory consumer bodies, civic and political society
The European Union (Money Laundering and Terrorist Financing) Regulations 2019 published
The European Union (Money Laundering and Terrorist Financing) Regulations 2019 were published on 25 November, amending the Criminal Justice (Money Laundering and Terrorist Financing) Act 2010 (CJA). A key change introduced by the regulations concerns the requirement that designated persons have in place "appropriate procedures" for their employees, or persons in a comparable position, to report a contravention of the CJA internally through a "specific, independent and anonymous channel. The regulations recognise that a bespoke approach is needed here.
The nature of the reporting channel to be created will be informed by the size and profile of the particular designated person. Designated persons will need to decide which persons in their organisation will require access to and training on the relevant reporting procedures. They will also need to be mindful of any outsourcing arrangements which may be in place. Training programmes will need to be updated to reflect the new requirements.
Results of the September 2019 survey on credit terms and conditions in euro-denominated securities financing and over-the-counter derivatives markets (SESFOD)
The European Central Bank (ECB) has published its results of the September 2019 survey on credit terms and conditions in euro-denominated securities financing and over-the-counter derivatives markets (SESFOD). The September 2019 survey collected qualitative information on changes between June and August 2019. The results are based on responses from a panel of 28 large banks, comprising 14 euro area banks and 14 banks with head offices outside the euro area. The main results were:
credit terms remained broadly unchanged for almost all counterparties between June and August 2019
most counterparty types intensified their efforts to negotiate more favourable terms
financing rates/spreads decreased for funding secured with most types of collateral
liquidity and trading deteriorated for main types of non-centrally cleared OTC derivatives
Capital Markets Union: Council adopts legislative reforms
The EU Council today has adopted a set of legislative reforms which are part of progress towards the capital markets union. The texts concern:
the creation of a new category of benchmarks contributing to sustainable finance
transparency obligations for sustainable investments
a new prudential framework for investment firms
a harmonised framework for covered bonds
rules promoting access to SME growth markets
All the texts were signed in Strasbourg and will be published in the Official Journal of the European Union.
EU consumers' protection to be reinforced
The EU is taking steps to boost consumer protection. Following an agreement with the European Parliament last March, the Council has adopted a directive, Directive (EU) 2019/… amending Council Directive 93/13/EEC and Directives 98/6/EC, 2005/29/EC and 2011/83/EU of the European Parliament and of the Council as regards the better enforcement and modernisation of Union consumer protection rules. Following the adoption of the directive, member states will have 24 months to adopt the measures necessary for its implementation. These measures will start to apply six months later. The directive provides for:
enhanced harmonisation and streamlining of some of the criteria used to determine the level of penalties for infringements of EU consumer law
a right to individual remedies for consumers when they are harmed by unfair commercial practices, such as aggressive marketing
enhanced transparency in online transactions, in particular regarding the use of online reviews, personalised pricing based on algorithms or higher ranking of products due to ‘paid placements’
the obligation of online marketplaces to inform consumers on whether the responsible trader in a transaction is the seller and/or the online marketplace itself
the protection of consumers in respect of 'free' digital services, meaning those for which consumers do not pay money but provide personal data, such as: cloud storage, social media and email accounts
clear information for consumers in case of price reduction
the removal of disproportionate burdens, such as the obligation to use outdated means of communication, imposed on businesses by existing legislation
clarifications on member states' freedom to adopt rules to protect the legitimate interests of consumers with regard to some particularly aggressive or misleading marketing or selling practices in the context of off-premises sales
clarifications on the way misleading marketing of 'dual quality' products should be dealt with by member states
Supervision in a digital world: how modern technology is driving change
In a speech by Pentti Hakkarainen, Member of the Supervisory Board of the ECB, at the EBI Policy Conference “Banking in Europe: a political, a monetary and a supervisory perspective” in Frankfurt am Main on 14 November 2019, it was stated that as a modern supervisor, the ECB is investing in new technologies to free up the time otherwise spent by supervisors on routine and repetitive tasks. Examples of where the ECB is deploying modern technology in the ECB’s supervisory work are:
natural language processing to help analyse unstructured data
deployment of advanced analytical models inside the ECB so that better insights can be extracted from the data it holds
development of an online portal that will also facilitate improvements in the way the ECB will communicate with the banks it supervises
ongoing supervision of technological change in the private sector
Consultation on alignment EU rules on capital requirements to international standards (prudential requirements and market discipline)
As part of the implementation process of the final set of Basel III reforms in the EU, the EU Commission has launched a public consultation seeking stakeholders’ views on specific topics in the areas of credit risk, operational risk, market risk, credit valuation adjustment risk. Beyond these topics related to the Basel III implementation, the Commission services would also welcome stakeholders’ views on certain other subjects with a view to ensuring convergent and consistent supervisory practices across the Union and alleviating the administrative burden. The consultation period closes on 3 January 2020.
Towards a climate-resilient financial system - Vasileios Madouros, Director for Financial Stability
In a speech delivered by Vasileios Madouros, Director for Financial Stability, the CBI set out what it is doing in the area of climate change. The CBI will increasingly be embedding climate risk issues into its financial stability assessments and supervision and has this year joined the Network for Greening the Financial System, a group of central banks and supervisors that exchange experiences and share best practices, to contribute to the development of climate risk management in the financial sector. The CBI is also active in a number of supervisory fora that are considering the impact of climate change on different parts of the financial sector, whether that is banks, insurance companies or investment funds.
ESMA publishes validation rules and XML schemas for SFTR reporting
The European Securities and Markets Authority (ESMA) has published further technical details for the reporting of Securities Financing Transactions (SFTs) as required under the SFT Regulation (SFTR). The publication includes the validations rules applicable to SFTR reports as well as the XML schemas reporting entities should use, including:
counterparty and TR data exchange
intra-TR data exchange
TR to authority data exchange
Under the SFTR, both parties to an SFT need to report new, modified or terminated SFTs to a registered or recognised trade repository (TR), including the composition of the collateral.