Financial Services Regulation & Compliance - Cross Sectoral December 2018

DOMESTIC

The role of RegTech in financial services - Colm Kincaid, Director of Securities Markets Supervision

Speaking at a symposium hosted by  Dublin City University, Mr Kincaid spoke about how such events provide an important forum for linking academia with industry and other stakeholders. He also said it would create opportunities for different areas of the financial services industry to engage more closely with one another and work collaboratively in the field of technological development.

He then went on to give some insight into one of the key supervisory initiatives over the next three-year strategic cycle - to harness data for better supervisory outcomes - as well as highlighting some of  the key priorities when it comes to technology in financial services.

CP126 - Consultation on the CBI's Approach to Resolution for Banks and Investment Firms

This consultation paper signals the CBI's proposed approach to resolution for banks and investment firms, pursuant to the CBI’s mandates and discretions under Regulation (EU) No 806/2014 (the Single Resolution Mechanism Regulation) and the European Union (Bank Recovery and Resolution) Regulations 2015.  The CBI has re-iterated that it is committed to clear, open and transparent engagement with stakeholders in fulfilling its objectives.

CP127 - Consultation on amendments to Prospectus Rules and consolidation into Central Bank (Investment Market Conduct) Rules

The CBI has proposed amending the Prospectus Rules in light of the changes to Irish prospectus law as a result of the Prospectus Regulation 2017/1129/EU and consolidating the Prospectus Rules into the Investment Market conduct (IMC) Rules. These amendments and consolidation are intended to occur when the Prospectus Regulation is fully in application.

The rules contained in the consultation paper may be subject to further change depending on the final text of Commission delegated acts and ESMA guidance under the Prospectus Regulation. The purpose of this Consultation Paper is to elicit feedback from stakeholders on these proposals, and in particular on key material amendments or additions proposed to be made to existing rules. When the consultation process is complete, the CBI intends to publish updated IMC Rules (encompassing prospectus requirements).

CP128 - Consultation on ​​Anti-Money Laundering and Countering the Financing of Terrorism Guidelines for the Financial Sector

The CBI is proposing to introduce guidelines, as set out in Schedule 1 of this consultation paper, in order to supplement Part 4 of the act, which sets out the obligations on firms to put in place systems and controls to prevent and detect money laundering and terrorist financing. The purpose of the guidelines is to set out the expectations of the CBI in respect of Firms compliance with their Anti-Money Laundering and Countering the Financing of Terrorism (AML/CFT) Guidelines obligations, following the enactment of the 2018 Act. 

The guidelines incorporate expectations set out in previous CBI publications that have been communicated to firms via CBI AML/CFT sector reports, AML/CFT Bulletins, and relevant ESA guidelines in addition to setting out the bank’s expectations with regard to additional obligations imposed under the Fourth Anti Money Laundering Directive.

EUROPEAN

ECB publishes the cyber resilience oversight expectations

The ECB has published the final cyber resilience oversight expectations for financial market infrastructures (FMIs). Cyber resilience is an important aspect of FMIs’ operational resilience and is thus also a factor affecting the overall resilience of the financial system and the broader economy. The cyber resilience oversight expectations are based on the global guidance on cyber resilience for financial market infrastructures.

EBA publishes final Guidelines on the exemption from the fall back mechanism under the RTS on SCA and CSC

The EBA has published final guidelines on the conditions that must be met by ASPSPs. ASPSPs must meet these conditions in order to be exempted from the obligation to implement the fallback mechanism under the Regulation (EU) 2018/389 on strong customer authentication and common and secure communication (SCA&CSC).

The guidelines aim to provide clarity to ASPSPs and national competent authorities regarding the elements that should be considered for the purpose of an exemption and at ensuring a consistent application of the conditions for an exemption across the 28 EU Member States. These final guidelines aim at specifying the conditions set out in Article 33(6) of the Regulatory Technical Standard (RTS), which must be met in order to be exempted from the obligation to implement the fallback mechanism. 

Remarks by Vice-President Valdis Dombrovskis at the ECOFIN press conference

At this press conference Mr Dombrovskis presented the 2019 European Semester package. He spoke about how Ministers broadly share the analysis that a strategy based on investment, structural reforms and fiscal responsibility is working, but that the situation differs from country to country.

He explained that in some countries important reforms are still outstanding and public debt level remains high, reducing the room for manoeuvre in case of future shocks. He then concluded by saying that although we are now in good economic times, the risking risks and global uncertainty cannot be ignored and that the time to act is now.

Money laundering: Council adopts conclusions on an action plan for enhanced monitoring (714/18)

The Council has adopted conclusions on an action plan to better tackle money laundering and terrorist financing. The conclusions set out a number of short-term non-legislative actions to address 8 key objectives, the most notable of which are:  

  • identifying the factors that contributed to the recent money laundering cases in EU banks, to better inform possible additional actions in the medium and long term;
  • mapping relevant money laundering and terrorist financing risks and the best prudential supervisory practices to address them; and
  • enhancing supervisory convergence and better take into account AML aspects in the prudential supervisory process.

Benoît Cœuré: Euro Cyber Resilience Board for pan-European Financial Infrastructures

In his speech at the second meeting of the Euro Cyber Resilience Board for pan-European Financial Infrastructures, Frankfurt, 7 December 2018. Mr Cœuré explained that the cyber threat facing the financial sector continues to be a challenge. From banking trojans affecting individual customers to systemic threats posed by ransomware and targeted attacks from advanced persistent threat groups, he discussed how the landscape is evolving on a daily basis.

He then discussed the Eurosystem cyber strategy for FMIs Eurosystem cyber resilience strategy and that this strategy rests on three pillars: individual FMI resilience, sector resilience and strategic regulator-industry collaboration.

EBA launches consultation to amend Regulation on benchmarking of internal models

The EBA has launched a consultation to amend the Commission's Implementing Regulation on benchmarking of internal models to adjust the benchmarking portfolios and reporting requirements in view of the benchmarking exercise it will carry out in 2020. The proposed changes aim at simplifying the portfolio's structure for the credit risk part of the exercise, and getting more insights into the model used for pricing for the market risk part of the exercise. The consultation will run until 31 January 2019.

Speech by Ignazio Angeloni, Member of the Supervisory Board of the ECB, at the Official Monetary and Financial Institutions Forum, London 10 December 2018

In his speech Mr Angeloni spoke about how the Official Monetary and Financial Institutions Forum has grown into a visible and lively discussion forum. He also noted that it retains a keen interest in European Union affairs and a practice of inviting speakers from across the channel. He then went to discuss that the Single Supervisory Mechanism (SSM) is now marking its fifth anniversary.

The SSM charter was adopted after lengthy negotiations with the Member States and the European Parliament. He then explained how SSM has laid out its strategy to deal with NPLs, arguably the main problem facing European banks after the crisis and that the clean-up of balance sheets will take several years, but the strategic direction is set.

EBA publishes an Opinion on the use of eIDAS certificates under PSD2

The EBA has published an opinion on the use of electronic identification, authentication and trust services (eIDAS) certificates under the RTS, SCA and CSC. In the opinion, the EBA clarifies specific aspects on the use of qualified certificates for electronic seals and qualified certificates for website authentication for the purpose of identification of payment service providers under the RTS, the content of these certificates, and the process for their revocation.

The opinion aims to address questions and concerns raised by market participants related to the use of eIDAS certificates.

EBA issues revised list of validation rules

The EBA has issued a revised list of validation rules in its Implementing Technical Standards (ITS) on supervisory reporting highlighting those, which have been deactivated either for incorrectness or for triggering IT problems. Competent authorities throughout the EU are informed that data submitted in accordance with these ITS should not be formally validated against the set of deactivated rules.

EBA consults on guidelines on ICT and security risk management

The EBA has launched a consultation on its draft guidelines on information and communication technology (ICT) and security risk management. These guidelines establish requirements for credit institutions, investment firms and PSPs on the mitigation and management of their ICT risks and aim to ensure a consistent and robust approach across the single market. The consultation runs until 13 March 2019.

The EBA calls for more action by financial institutions in their Brexit-related communication to customers

As a follow up to its June 2018 opinion on financial institutions' preparedness for the UK withdrawal from the EU, the EBA has reminded affected financial institutions to maintain their efforts in effective contingency planning and to increase their efforts in communicating to customers. The EBA urges such institutions to take its opinion into careful consideration and to swiftly proceed with advising customers on the specific implications stemming from the UK withdrawal from the EU.

ESMA updates Q&A on implementation of CRA Regulation

ESMA has updated its Questions and Answers (Q&As) on the Credit Rating Agencies Regulation (CRAR). The CRAR requires a CRA to immediately notify errors in its rating methodologies or in their application to ESMA and all affected rated entities.

This Q&A clarifies ESMA’s view as to what constitutes an error within the meaning of Article 8(7) of CRAR. The purpose of this Q&A is to provide a high level of transparency to entities directly supervised by ESMA regarding ESMA’s supervisory approach. ESMA will periodically review these Q&As and update them where required.

ESMA publishes Consultation Paper - Guidelines on Disclosure Requirements Applicable to Credit Ratings

These guidelines clarify disclosure requirements under The CRA Regulation to the issuance of credit ratings or credit rating outlooks ('credit ratings’). The purpose of these requirements is to ensure a sufficient level of transparency around CRA’s credit ratings. With this transparency, the user of the credit rating is better placed to understand the reasoning behind the credit rating, any limitations in the judgements or assumptions underlying the applicable methodology. They will also know where to find further information to allow them to conduct their own due diligence.

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

Date published: 15 January 2019