Financial Services Regulation & Compliance - Cross Sectoral August 2018
Financial Services Regulation & Compliance - Cross Sectoral August 2018
Prospectus Amendment Regulations signed into law
The European Union Prospectus Amendment Regulations 2018 were signed into law by Minister for Finance Pascal Donohoe on 3 August 2018. The Regulations transpose some aspects of the Prospectus Regulation (Regulation 2017/ 1129). The Regulations govern the use of a prospectus when securities with a value of over €1m are offered to the public or admitted to trading on a regulated market. Offerings of securities with a total consideration of less than €5m calculated over a 12 month period were previously exempt from the requirement to publish a prospectus; this limit has been reduced to €1m. Where offers of securities are not subject to the passporting notification provisions of Regulation 56, however, such offers will be exempt if their value is below €5m. Other provisions of the Prospectus Regulation came into effect on 21 July 2017.
Individual accountability - our approach - Seana Cunningham, Director of Enforcement and Anti-Money Laundering
Director of Enforcement and Anti-Money Laundering Seana Cunningham expressed the view of the Central Bank of Ireland (CBI) that individual accountability is a key cultural driver of misconduct. She noted that the Fitness and Probity Regime, as well as the Administrative Sanctions Procedure, are currently used to hold individuals accountable. She explained that the Law Reform Commission's Issues Paper on Regulatory Enforcement and Corporate Offences, published in January 2018, and the CBI's July 2018 report on Behaviour and Culture of Irish Retail Banks will be used to further develop a regulatory regime focused on individual responsibility.
The proposed Individual Accountability Framework consists of four elements:
Enforceable Conduct Standards binding on individuals working within regulated firms;
A Senior Executive Accountability Regime compelling firms to disclose where decision-making responsibility lies;
Enhancing the CBI's oversight functions within the current Fitness and Probity regime; and
A unified enforcement process that would empower the CBI to investigate suspected misconduct by firms and individuals on an equal basis.
BI announces appointment of new Director of Financial Stability
Vasileios Madouros has been announced as the CBI's Director of Financial Stability. The Director of Financial Stability is responsible for the leadership of the Macro-Financial Division, Resolution Division, the Central Credit Register, Markets-Based Finance and International Relations. The Director is a member of the Senior Leadership Team of the Central Bank and leads a team of over 70 staff. He will take up the role from January 2019.
The CBI has updated its Lender FAQ, which aim to clarify the applicability of Credit Information Providers' (CIP) obligations under the Credit Reporting Act 2013. The 2013 Act creates a Central Credit Register (CCR) and subjects Credit Information Providers to certain duties, such as the requirements to verify the identity of credit information subjects and the accuracy of information these subjects provide. The FAQ focus on how to establish whether firms are Credit Information Providers. Many additional issues are clarified, such as the means of communicating changes in the CCR and how to register for the Lender Area.
ECB seeks feedback on draft ECB Regulation on Money Market Statistics
The ECB published a draft regulation amending the Money Market Statistical Reporting (MMSR) Regulation which will guarantee that transactions with all financial counterparties are covered under the Regulation. The amending regulation aims to simplify the reporting scheme and improve the quality of euro money market statistics reported to European System of Central Banks (ESCB). It will also further support the reporting of the Legal Entity Identifier (LEI) of counterparties, once available, to ensure that the data collection benefits from the extended mandatory use of the LEI in reporting in the Union. Moreover, it will firm up the obligations of reporting agents to meet the high standards designed to protect the integrity of the information. The ECB has requested feedback by 10 September 2018.
Financial Stability Board (FSB) and standard-setting bodies consult on effects of reforms on incentives to centrally clear over-the-counter (OTC) derivatives
The FSB the Basel Committee on Banking Supervision (BCBS), the Committee on Payments and Market Infrastructures (CPMI) and the International Organization of Securities Commissions (IOSCO) published a consultative document on incentives to centrally clear OTC derivatives. The document highlighted that post-crisis reforms, in particular the capital, margin and clearing reforms, appear to create an overall incentive to centrally clear OTC derivatives. It also noted that non-regulatory factors, such as market liquidity, counterparty credit risk management and netting efficiencies can interact with regulatory factors to affect incentives to centrally clear. The analysis suggests that the reforms are achieving their goals of promoting central clearing. This is consistent with the goal of reducing complexity and improving transparency in the OTC derivatives markets.
FSB seeks feedback on peer review of implementation of LEI
The Financial Stability Board (FSB) is seeking feedback as part of its thematic peer review on the implementation of the LEI. The peer review will assess the approaches and strategies used by FSB members to implement the LEI, consider whether the current rates of LEI adoption are sufficient to meet the objectives and needs of FSB members and identify challenges in furthering the implementation and use of the LEI. The FSB invites feedback from financial institutions, industry and consumer associations and other stakeholders. Feedback is accepted until 21 September 2018.
European Securities and Markets Agency (ESMA) issued clarifications on the clearing obligation and trading obligation for pension scheme arrangements
ESMA issued an updated statement on the clearing obligation and trading obligation for pension scheme arrangements (PSAs), with the objective to avoid disruption to certain PSAs who may face challenges clearing their OTC derivative contracts and trading them on trading venues on 17 August 2018, when the final exemption from the clearing obligation under EMIR expires. EMIR introduced a temporary exemption for PSAs from the clearing obligation. With the two possible extensions already granted, there is no possibility to extend this temporary exemption. MiFIR exempts financial counterparties exempted from the clearing obligation under EMIR from the trading obligation for derivatives. The statement clarifies that ESMA expects competent authorities not to prioritise their supervisory actions towards entities that will likely be exempted.
ESMA releases final report on technical standards on disclosure requirements under the Securitisation Regulation
Following ESMA's consultation paper on Draft technical standards on disclosure requirements under the Securitisation Regulation published in December 2017, ESMA has published its final report on technical standards requirements under the Regulation. According to Articles 7 and 17 of the Regulation, ESMA is mandated to draft technical standards covering securitisation disclosure requirements and submit these draft standards to the Commission by 18 January 2019. ESMA took note of the substantial market feedback received on the scope of application of these draft technical standards and has adjusted the structure of these, in order to better clarify the scope of requirements across its related disclosure mandates in order to provide additional clarity for stakeholders. These draft technical standards are to be submitted to the European Commission for endorsement.
ESMA defines disclosure standards under Securitisation Regulation
ESMA has issued a set of draft regulatory and implementing standards (RTS/ITS) under the Securitisation Regulation, which concern the details of a securitisation to be made available by the originator, sponsor and SSPE, as well as the format and templates for doing so. These RTS contain detailed arrangements to implement the new European regulatory framework for securitisations, which is intended to promote simple, transparent and standardised (STS) securitisations. In line with ESMA’s legal mandates under the different related articles of the Securitisation Regulation, the RTS also distinguishes between all securitisations and those securitisations that are required to make information available via a securitisation repository. ESMA has prepared these draft technical standards with due regard for its mandates of investor protection, orderly markets, and financial stability. ESMA submitted these draft RTS/ITS to the European Commission for endorsement. These RTS/ITS will contribute to delivering a regulatory rule-book for European securitisation markets.
ESMA publishes summary of conclusions of Securities and Markets Stakeholder Group
ESMA has published a summary of the conclusions reached by Securities and Markets Stakeholder Group. On the topic of financial technology, the Commission's proposal for a crowdfunding regulation was discussed. ESMA noted that crowdfunding was not an immediate priority, compared with other issues such as virtual currencies and initial coin offerings. ESMA also presented a draft of its Work Programme for 2019. ESMA's activities will include implementing EMIR 2.2 and a review of its role in supervising Trade Repositories and Securities repositories. Other priorities include managing supervisory convergence and financial stability matters arising from Brexit, continuing work on the Capital Markets Union Action Plan and completing new tasks stemming from the Securities Financing Transactions Regulation and the Securitisation Regulation.
EBA publishes final report on the application of the Joint Committee Guidelines on complaints handling
The EBA published its final report on the application of the existing Joint Committee Guidelines on complaints-handling, to the authorities supervising the new institutions established under the revised Payment Service Directive (PSD2) and the Mortgage Credit Directive (MCD). This application will ensure that an identical set of requirements for complaints-handling continues to apply to all financial institutions across the banking, investment and insurance sectors. This will provide consumers with the same level of protection, irrespective of which regulated product or service they are purchasing and which regulated institution they are purchasing it from. The deadline for competent authorities to report whether or not they comply with the guidelines will be two months after the publication of the translations. The guidelines will apply from 1 May 2019.
EBA publishes final draft technical standards on home-host cooperation under PSD2
The EBA published its final draft regulatory technical standards (RTS) specifying the framework for cooperation and the exchange of information between competent authorities under PSD2. The RTS clarify the type of information and the templates to be used by payment institutions when reporting to the competent authorities of the host Member States on the payment business activities carried out in their territories. These RTS have been developed in accordance with Article 29(6) of PSD2, which requires the EBA to specify the framework for cooperation and exchange of information between competent authorities of the home Member State and of the host Member State.