Financial Services Regulation & Compliance - Cross Sectoral Feb 2018

DOMESTIC

Minimum Competency Code 2017 and Minimum Competency Regulations 2017 - Questions and Answers

The Q&A document was developed to provide additional explanation where concerns or uncertainty has arisen in relation to the MCC 2017 and the Minimum Competency Regulations 2017. The Q&A is separated into a section which deals with general questions and a section for questions relating to the credit union sector.

Data Protection Bill 2018

The Minister for Justice and Equality, Charlie Flanagan, and the Minister of State for Trade, Employment, Business, EU Digital Single Market and Data Protection, Pat Breen, announced publication of the Data Protection Bill 2018. The Bill incorporates Ireland's national implementing measures required under the GDPR, which comes into force on 25 May 2018, and creates a new regulatory framework for the enforcement of data protection laws in Ireland.

Response to the Committee on Public Petitions in response to correspondence on Petition No P00047/17

The Central Bank published a response to correspondence on Petition No P00047/17, addressed to the Committee on Public Petitions. The response deals with the issues raised by the petition by:

  • Describing the statutory role and responsibilities of the Central Bank of Ireland.
  • Discussing the authorised capital and surplus income.
  • Discussing the money supply and reserve requirements of the Euro area which are a standard monetary policy tool in central banking.
  • Outlining the importance of Central Bank independence.

Guidance for Completion of the Anti-Money Laundering, Countering the Financing of Terrorism and Financial Sanctions: Risk Evaluation Questionnaire

The Central Bank published its Guidance for Completion of the Anti-Money Laundering, Countering the Financing of Terrorism and Financial Sanctions: Risk Evaluation Questionnaire for 2018. The purpose of the guidance is to provide information to Credit and Financial Institutions who are required to file a Risk Evaluation Questionnaire (‘REQ’) to the Central Bank of Ireland using the Online Reporting System. They focus on the structure and content of the Risk Evaluation Questionnaire and provide information on accessing and submitting the Risk Evaluation Questionnaire.

Competition and Consumer Protection (Amendment) Bill 2018

The purpose of the Bill is to provide the Competition and Consumer Protection Commission with powers to issue administrative sanctions against undertakings engaged in anti-competitive practices by amending the Competition and Consumer Protection Act 2014; and to provide for related matters.

Companies (Statutory Audits) Bill 2017

The Companies (Statutory Audits) Bill 2017, which further transposes the EU statutory audit package and consolidates existing audit legislation into the Companies Act 2014, commenced and completed the Committee Stage in Dáil Eireann when the Committee approved the Bill and the various amendments tabled. The amendments which were agreed were mainly technical in nature and did not contain any new key audit reforms. The Audits Bill will now to be scheduled for Report Stage in Dáil Eireann.

Consumer Protection (Regulation of Credit Servicing Firms) (Amendment) Bill 2018

The Consumer Protection (Regulation of Credit Servicing Firms) (Amendment) Bill 2018 entered the first stage of the legislative process. The purpose of the Bill is to amend the Consumer Protection (Regulation of Credit Servicing Firms) Act 2015 to allow for the regulation of loan owners and sale of loans; and to provide for related matters.

Markets Update Issue 3 2018

The Central Bank published the third issue of its Markets Update. This Markets Update refers to the publication of a notice of intention to amend the requirements for loan origination Qualifying Investor AIF. It also refers to the issuance of recommendations and good practices by IOSCO to improve liquidity risk management for investment funds.

Markets Update Issue 4 2018

The Central Bank published the fourth issue of its Market Update. The publication includes communication to firms seeking authorisation in 2018. The communication is in relation to firms' engagement with the Central Bank during the application process. The publication includes reference to enhancements being made to the Regulated Disclosures teams in the Central Bank. The teams are upgrading their document management and workflow system and as a result most submissions by stakeholders will require “submission templates” containing details related to each submission. The system is due to go live in mid Q2 2018.

The Markets Update also refers to a number of ESMA publications including updates to Q&As and guidelines covering a number of areas such as MiFID II, MiFIR, the Benchmarks Regulation.

Research Bulletin No.10

The Central Bank published the tenth edition of its Research Bulletin with the aim of aim of highlighting economic research and associated activities conducted by bank staff during 2017. Some of the topics covered in this series include:

  • The treatment of global firms in the national accounts.
  • Deleveraging across Irish house-holds; the impact of financial sector support on public finances.
  • A non-employment index for Ireland; examining the relationship between the income distribution and mortgage lending; the macro effects of LTV and LTI ratios within a DSGE model.
  • A comparison of alternative macroprudential tools; an update on characteristics of the mortgage market.
  • Exchange rate pass-through to Irish prices and resolving non-performing loans.

Financial Globalisation and Central Banking in Ireland - Governor Philip R Lane

Governor Philip Lane spoke to the Financial Globalisation Symposium as part of the programme to commemorate the 75th anniversary of the Central Bank of Ireland about the topic of financial globalisation. Governor Lane spoke about the global financial cycle being a primary detriment of financial stability conditions in small open economies, as learned from the international credit boom during 2003-2008. He stated that the Central Bank needs to be vigilant in understanding the international financial environment, including enhanced surveillance of international financial risks by tracking and interpreting data on international financial flows, international balance sheets, international imbalances and international asset prices.

We continue to challenge the effectiveness of the underlying culture in banks - Director General Derville Rowland

The Central Bank's Director General, Financial Conduct set out her priorities for the financial conduct pillar of the Central Bank during a speech at UCD. The speech highlighted the importance of trust and confidence in financial services and the system of regulation. Ms Rowland, in outlining her vision for the financial services sector, stated that the accountability of senior personnel in regulated entities should be strengthened. She outlined her vision for the financial services sector as a system “underpinned by a strong culture of compliance, with firms and the people working in those firms acting in the best interests of their customers, backed up by comprehensive and enforceable legislation, rigorous supervision, and a credible threat of enforcement including powers of redress when consumers have suffered detriment.”

EUROPEAN

Consultation on the review of the SME definition

The European Commission has opened a consultation on the definition of SME as provided for in Recommendation 2003/361/EC. The Commission is preparing for an evaluation and possible revision of some aspects of the definition. The consultation will allow those interested to provide feedback on the evaluation and impact assessment of the definition. The consultation closes on 6 May 2018.

Proposal for a Regulation of the European Parliament and of the Council amending Regulation (EU) No 575/2013

The proposed regulation amends Regulation (EU) No 575/2013 (CRR) as regards the leverage ratio, the net stable funding ratio, requirements for own funds and eligible liabilities, counterparty credit risk, market risk, exposures to central counterparties, exposures to collective investment undertakings, large exposures, reporting and disclosure requirements. This is part of the legislative package that includes also amendments to CRD, BRRD and SRMR.

Commission Delegated Regulation (EU) 2018/171

Commission Delegated Regulation (EU) 2018/171 on supplementing Regulation (EU) No 575/2013 of the European Parliament and of the Council with regard to regulatory technical standards for the materiality threshold for credit obligations past due was published. It shall apply from 7 May 2018.

Composition of the Working Group on Euro Risk-free Rates Announced

The composition of the working group on euro risk-free rates was announced by the ECB, ESMA, the EC and the FSMA. The working group will be tasked with identifying and recommending alternative risk-free rates and studying potential issues in relation to transition to these rates in line with its terms of reference. The rates could be used as an alternative to the current benchmarks used in a variety of financial instruments and contracts.

ESMA publishes 2018 Supervisory Convergence Work Programme

ESMA has published its 2018 Supervisory Convergence Work Programme. The programme details the activities and tasks it will carry out to promote sound, efficient and consistent supervision across the European Union (EU). For 2018 the priorities for supervisory convergence include:

  • Ensuring that MiFID II/MiFIR are applied in a sound, efficient and consistent manner across the EU (continuous).
  • Improving data quality to ensure efficient reporting under various requirements set by EU legislation (continuous).
  • Ensuring supervisory convergence in the context of the UK’s decision to withdraw from the EU (new).
  • Safeguarding the free movement of services in the EU through adequate investor protection in the context of cross-border provision of services (continuous).
  •  Monitoring developments in financial innovation, in particular through the analysis of emerging and existing instruments, platforms and technology (new).

ESMA publishes 2018 work programme for CRAs, trade repositories and third country CCPs

ESMA has published its 2017 Annual Report and 2018 Work Programme. This sets out the main supervisory activities for credit rating agencies (CRAs), trade repositories (TRs), and third country central counterparties (TC-CCPs) in the EU. The report also looks at ESMA's supervisory activities and achievements in 2017.

In 2018 ESMA will prioritise its supervision on the quality of the credit rating process, including CRAs’ validation practices and the quality of data reported by TRs. Focus will also continue on information technology and internal control, in addition to governance structures and management quality.

ESMA publishes risk assessment work programme for 2018

ESMA has published its risk assessment work programme which sets out its priorities in assessing risks for securities markets 2018. The programme provides an overview of the analytical, research, data and statistical activities by ESMA. 

EBA publishes corrective update of XBRL taxonomy 2.6 for remittance of 2018 benchmarking exercise

The EBA published a corrective update (version 2.6.0.1) to the XBRL taxonomy that Competent Authorities shall use for the remittance of data under the Implementing Technical Standards (ITS) on benchmarking of internal approaches, for the 2018 benchmarking exercise. The update corrects a technical error in two column labels included in the XBRL table link base representation of template C 101.

Proposal for a Regulation of the European Parliament and of the Council amending Regulation (EU) No 575/2013

Proposal for a regulation as regards the leverage ratio, the net stable funding ratio, requirements for own funds and eligible liabilities, counterparty credit risk, market risk, exposures to central counterparties, exposures to collective investment undertakings, large exposures, reporting and disclosure requirements and amending Regulation 648/2012 (EMIR).

Proposal for a Directive of the European Parliament and of the Council amending Directive 2014/59/EU

The proposed Directive amends an existing directive, the BRRD. The proposal harmonises national laws on recovery and resolution of credit institutions and investment firms, in particular as regards their loss-absorbing and recapitalisation capacity in resolution, to the extent necessary to ensure that Member States and Union banks have the same tools and capacity to address bank failures in line with the agreed international standards.

Proposal for a Directive of the European Parliament and of the Council amending Directive 2013/36/EU

The proposed Directive amends Directive 2013/36/EU (CRD IV) as regards exempted entities, financial holding companies, mixed financial holding companies, remuneration, supervisory measures and powers and capital conservation measures.

Proposal for a Regulation of the European Parliament and of the Council amending Regulation (EU) No 806/2014

The proposed Regulation amends an existing Regulation, Single Resolution Mechanism Regulation (the SRMR). The proposal harmonises national laws of Member States participating in the SRM on recovery and resolution of credit institutions and investment firms, in particular as regards their loss-absorbing and recapitalisation capacity in resolution, to the extent necessary to ensure that the SRB and national resolution authorities of participating Member States and banks established in the Banking Union have the same tools and capacity to address bank failures in line with the agreed international standards.

Article 29 Working Party - February 2018 Plenary Meeting

The Article 29 Working Party (WP29) February plenary meeting examined certain critical matters with regards to the implementation of the General Data Protection Regulation (GDPR). It also adopted seven key documents for the preparation of the application of GDPR and elected a new Chair.

Keynote Address: A Measured Approach to Fintech

Chair of ESMA, Steven Maijoor delivered a keynote address at Afore Consulting’s Second Annual FinTech and Digital Innovation Conference. His speech focused on taking a measured approach to FinTech. Mr Maijoor spoke about monitoring and assessing FinTech, ensuring that there is a measure of different innovations and that they are balanced and considered from a policy and rulemaking perspective, taking risks and opportunities into account.

Commission Implementing Regulation (EU) 2018/292

This implementing regulation lays down implementing technical standards with regard to procedures and forms for exchange of information and assistance between competent authorities according to Regulation (EU) No 596/2014 of the European Parliament and of the Council on market abuse.

Draft Withdrawal Agreement published by European Commission

The European Commission has published the draft Withdrawal Agreement between the EU and the United Kingdom. The draft Withdrawal Agreement consists of six parts, including introductory provisions, citizens' rights, other separation issues such as goods placed on the market before the withdrawal date, the financial settlement, transitional arrangements, and institutional provisions, and a protocol on Ireland / Northern Ireland.

The draft Withdrawal Agreement proposes a transitional (standstill) period ending on 31 December 2020. The draft Withdrawal Agreement will now be discussed in the Council (Article 50) the Brexit Steering Group of the European Parliament before being formally sent to the United Kingdom for negotiation.

Reaping the benefits of payment services in a new regulatory environment

Yves Mersch, Member of the Executive Board of the ECB, addressed the European Banking Federation’s Executive Committee on 22 February.  The speech discussed the revised Payment Services Directive (PSD2). Mr Mersch explained how the new legislative framework will support innovation and competition in retail payments, enhance the security of payment transactions and the protection of consumer data. Mr Mersch encouraged all Payment Service Providers to ensure the highest level of security in their payment services and to adopt the requirements of the Regulatory Technical Standards ahead of time.

Statement by Danièle Nouy, chair of the Supervisory Board of the ECB

Danièle Nouy, chair of the Supervisory Board of the ECB issued a statement in relation to money laundering. Nouy stated that EU Member States chose to keep the responsibility for combatting money laundering at the national level, when creating the SSM Framework.

Breaches of anti-money laundering can be symptomatic of more deeply rooted governance deficiencies within a bank but the ECB does not have the investigative powers to uncover such deficiencies. It is only when such breaches have been established by the relevant national authority can the ECB take these facts into consideration for the purposes of its own tasks.

ESAs warn consumers of risks in buying virtual currencies

The European Supervisory Authorities (ESAs) for securities (ESMA), banking (EBA), and insurance and pensions (EIOPA) have today issued a pan-EU warning to consumers regarding the risks of buying virtual currencies. They warned that virtual currencies are highly risky and unregulated products and are unsuitable as investment, savings or retirement planning products. The ESAs are concerned about the increasing number of consumers buying virtual currencies that are unaware of the risks involved.

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

Date Published: 15 March 2018