Tracker, Financial Services Regulation & Compliance - Banking


Central Bank of Ireland announces appointment of Director of Credit Institutions Supervision
The Central Bank's Head of Banking Supervision, Ed Sibley was recently appointed Director of Credit Institutions Supervision after the role was vacated by the promotion of Sharon Donnery to Deputy Governor of Central Banking. Mr Sibley will now be responsible for overseeing the supervision of credit institutions and providing support to the Registrar of Credit Unions.

Central Bank of Ireland updates consumers on its examination of Tracker Mortgage issues
The Central Bank has published a document updating consumers on the progress of its examination of tracker mortgage issues. The update informs consumers that the plans required to be submitted by lenders to the Central Bank by the end of March 2016 are currently under review. This review is not expected to conclude until 2017. In the meantime, lenders are required to carry out the next step of their reviews (overseen by external independent third party assurers), which involve identifying those customers who may have been impacted by either their failure to honour their contractual entitlements or to comply with regulatory requirements regarding disclosure and transparency of information. The Central Bank also set out its expectations for lenders in this update to consumers – lenders are expected to communicate with all impacted customers in a timely and clear manner, have the necessary staff and systems in place to do so and carry out a number of steps in dealing with customers. Where an incorrect rate of interest has been charged, this practice must immediately cease and the fact of the incorrect charge must be communicated to the customer. Once a customer’s account is fully reviewed, a letter must be issued explaining the nature of the error, the correct rate for that customer and an outline of the next steps involved in the examination, including the redress and compensation process. The Central Bank has indicated its intention to publish another progress update at the end of July 2016. 

Central Bank of Ireland publishes new Economic Letter on impacts of the countercyclical capital buffer
The Central Bank has published an overview of the countercyclical capital buffer ('CCB'), a Europe-wide macro-prudential instrument which came into effect on 1 January 2016. The Central Bank's Economic Letter explains that, were the Central Bank to increase the CCB rate for Irish exposures from its current 0%, banks would 'generally' have one year to meet the increased capital requirement. The CCB will be reviewed quarterly and the rate for individual institutions will be measured as the average of the CCB rates in the countries where they operate. The letter also applies the economic indicators to historical data, and makes the claim that the use of the CCB, and accompanying economic indicators recommended by the European Systemic Risk Board, would have flagged the potential excessive credit growth and rising systemic risk in Ireland before 2008.

European Central Bank Annual Report 2015 is presented to the EU Parliament's Committee on Economic and Monetary Affairs
Vice-President of the ECB, Victor Constancio presented the 2015 ECB Annual Report to the European Parliament's Committee on Economic and Monetary Affairs on 7 April 2016. The Report sets out the current challenges of the euro areas as being "(i) a further increase in risk premia, a decline of financial asset prices inducing capital losses, in the context of possible emerging market stress and persistently low commodity prices; (ii) weak profitability for insurers and for banks, aggravated for some banks by non-performing loans (NPLs) inherited from the crisis; (iii) sovereign and corporate debt sustainability concerns; and (iv) the potential for stress in the investment funds sector – and shadow banking more broadly". Mr Constancio emphasised that there is no room for complacency in relation to risk reduction in the EU's financial system, despite the progress made to date. The ECB sees its supervisory work in relation to legacy assets and non-performing loans as a priority. The Report also emphasised the importance of creating a 'truly single rulebook' for banking and highlighted missing elements of the international regulatory agenda, such as the need to implement the Financial Stability Board's total loss-absorbing capacity standard for large, complex, global systemically important banks within the EU framework. In presenting the report, Vice President Constancio welcomed the EU Commission's proposal for the European Deposit Insurance Scheme and emphasised the ECB's strong support for the capital markets union.

European Banking Authority launches consultation on Regulatory Technical Standards for the disclosure of encumbered and unencumbered assets
The EBA has launched a consultation on draft Regulatory Technical Standards ('RTS') as required under the Capital Requirements Regulation and which build on the EBA Guidelines. The RTS include disclosure requirements and additional information requirements for encumbered and unencumbered assets, including data requirements, format and the timing of disclosures. The RTS include three disclosure templates for institutions to follow in disclosing information, and require information to be submitted on the importance of encumbrance to the funding model of that entity. The EBA aims to ensure that transparent and harmonised information is produced which will assist those participating in the market in comparing institutions. Views are being sought up to the deadline of 25 July 2016.

European Banking Authority publishes final Guidelines for disclosing confidential information under the BRRD
The EBA has published final Guidelines defining how confidential information collected pursuant to the Bank Recovery and Resolution Directive should be disclosed by national supervisory authorities.  The Guidelines cover how confidential information should be provided in summary or collective form and define the principle-based factors for anonymising the information, which vary depending on the number of institutions the confidential information relates to, specific characteristics allowing for the identification of the entities referred to and the timing of a disclosure where it may create a risk of the individual institutions or entities being identified.

European Banking Authority publishes Opinion on measures credit and financial institutions can take to comply with EU AML/CFT requirements when providing asylum seekers from higher-risk jurisdictions with financial products and services
The EBA, in its Opinion on how to comply with AML/CTF when providing asylum seekers from higher-risk jurisdictions with financial products and services, states that providing a more limited range of services on a risk-sensitive basis (for example, by not permitting overdraft facilities on accounts) or setting up stricter internal controls which will facilitate early intervention in the event of suspicion, may reduce risk. The Opinion also states that on-going monitoring of the business relationship and of transactions is key to effective mitigation of AML/CTF risks. Monitoring should include setting expectations of the customer’s behaviour in order to determine what might constitute a suspicious transaction for that customer.

European Securities and Markets Authority publishes first EU-wide stress test regarding Central Counterparties
ESMA has published its first EU-wide stress test exercise regarding Central Counterparties ('CCPs'), as conducted under the European Markets Infrastructure Regulation ('EMIR Regulation') in order to identify possible vulnerabilities. The stress test focussed on the counterparty credit risk CCPs would face were multiple clearing members to default and simultaneous market price shocks to occur. An analysis of interdependency and exposures concentration was then undertaken. ESMA found that European Central Counterparties "seem well equipped to face severe scenarios", however it addressed two recommendations to National Competent Authorities ('NCAs') arising from this stress test. Firstly, where CCPs are assessing the credit worthiness of clearing members, any potential exposures due to their membership in other CCPs should be taken into account. Secondly, ESMA also recommends NCAs ensure CCPs revise their price shocks in cases where the test identified internal stress testing framework that was not as conservative as either the minimum shocks defined or the most extreme historic price changes observed.

European Banking Federation requests accelerated adoption of proposal for standardised securitisation Regulation
The EBF has issued a statement calling for the EU institutions to finalise the proposal for a Regulation governing simple, transparent and standardised securitisations as soon as possible. The EBF is concerned that the current timetable for the adoption of the proposals (the proposal is currently at Committee stage in the EU Parliament) will unduly delay the restarting of markets for STS securitisation. 

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

Date published: 04 May 2016