Financial Services Regulation & Compliance - Banking August 2018

DOMESTIC

Central Bank of Ireland (CBI) welcomes the European Supervisory Authorities' (ESA) publication of Brexit Opinions

The CBI welcomed the publication by the ESA of opinions on the impact of the UK withdrawing from the EU. The European Securities and Markets Authority (ESMA) reminded regulated entities of the need to make timely submission of requests for authorisation in the context of the UK withdrawing from the EU. ESMA noted that as there is no assurance that a transition period will be agreed, entities need to consider the worst-case scenario where a hard Brexit would take place on 30 March 2019. The European Banking Authority (EBA) published an opinion relating to the risks posed by lack of preparation of financial institutions for Brexit. Financial institutions must take practical steps now to prepare for the possibility of a withdrawal of Brexit with no ratified Withdrawal Agreement in place and no transition period.  

CBI publishes Regulatory Service Standards Performance Report H1 2018

The CBI has published its Regulatory Service Standards Performance Report for the first half of 2018. The report outlines the CBI's performance, set against 45 Service Standards to which it has committed itself, in processing applications for authorisation of Investment Firms and financial service providers, as well as Fitness and Probity Pre-Approval Controlled Function Individual Questionnaires.

CBI publishes Financial Stability Note: International bank flows and bank business models since the crisis

A Financial Stability Note by Valerie Herzberg and Peter McQuade examines developments in cross-border banking since the global financial crisis. It considers whether the post-crisis business models of many banks have implications for international risk sharing.

The key findings of the note are:

  • Euro area banks, including those in Ireland, are now more domestically oriented, smaller, with less trading, and more deposit-funded.
  • The more conservative approach of many banks is partly related to regulation put in place after the global financial crisis to enhance financial stability.
  • It noted that a move towards smaller and less complex units may limit economies of scale and mitigate the advantages of certain cross-border activities for banks.
  • A number of European and national reforms are still necessary for the banking sector to play a greater role as a shock absorber in the European banking union.
  • CBI publishes Systemic Risk pack

The CBI developed a Systemic Risk Pack (SRP), which presents indicators and visualisation methods for monitoring systemic risk in the Irish financial system. This bi-annual publication is created in order to facilitate macro-prudential analysis and to focus policy maker discussion and the CBI has recently published this data.

EUROPEAN

ESRB publishes Working Paper on bank resolution and public backstop

The ESRB has released a Working Paper entitled 'Bank resolution and public backstop in an asymmetric banking union'. The Paper notes that the Bank Recovery and Resolution Directive lacks sufficient risk-sharing across Eurozone countries as regards the recovery of failing banks. It proposes a common fiscal backstop and assesses how such a mechanism could be implemented. The Paper finds that a fiscal backstop should take account of fiscal differences between Eurozone countries by employing laxer conditions on access to the backstop for initially stronger economies.

For further information please contact a member of the Financial Regulation team.

Date Published: 7 September 2018