Tracker, Financial Services Regulation & Compliance - Cross Sectoral / Other
Amended Transparency Regulations and New Transparency Rules
The Minister for Finance has introduced the Transparency (Directive 2004/109/EC) (Amendment) (No. 2) Regulations 2015 with effect from 26 November 2015. These Regulations implement Directive 2013/50/EU into Irish law. The regulations:
- amend the definition of “home Member State”;
- amend the period in which issuers are required to publish annual and half-yearly financial reports; and
- remove the requirement on issuers to produce interim management statements.
The Central Bank of Ireland has also published updated Transparency Rules which came into operation on 30 November 2015. Changes made to the Transparency Rules include deletion of references to interim management statements, changes to the major shareholdings notification requirements, amendments to Home Member State notification procedures, the inclusion of references to the new standard forms, deletion of guidance relating to filing of amendment to instruments of incorporation, updates to legislative references, and other minor changes.
Oireachtas passes Finance (Miscellaneous Provisions) Act 2015
The Oireachtas has signed the Finance (Miscellaneous Provisions) Act 2015 into law. The Act makes provision in relation to the Agreement on the Transfer and Mutualisation of Contributions to the Single Resolution Fund. The Act provides for the establishment of a legacy fund, the transfer of 0.2% of covered deposits to the legacy fund, the return of the balance to the credit institution concerned, the cessation of operation of the legacy fund, the Central Bank power to direct payment of the relevant amount into the deposit protection account, the order of payments on occurrence of a compensation event, attribution of paid contributions upon cessation of business or winding up of credit institution, invalidity of charges on deposits by credit institutions, reimbursement of Central Bank by the Central Fund and related matters.
New Central Bank list of Pre-Approval Controlled Functions
The Central Bank has adopted the Central Bank Reform Act 2010 (Sections 20 and 22) (Amendment) Regulations 2015 which amends Schedule 2 to the Central Bank Reform Act 2010 (Sections 20 and 22) Regulations 2011; effective from 1 January 2016. The new Schedule 2:
- removes "secretary" from the general list of pre-approval controlled functions (PCFs) and replaces it with "chief operating officer";
- exempts from the general list of PCFs - limited partners (within the meaning of Section 3 of the Investment Limited Partnerships Act 1994;
- clarifies that not all regulated financial service providers who are natural persons are in the general list of PCFs, but that they must also have their principal place of business in the State;
- changes the designation of "Head of Risk" to "Chief Risk Officer" in the general list of PCFs;
- amends the reference to insurance and re-insurance undertakings to refer to the meaning in the 2015 Regulations or the Finance (Miscellaneous Provisions) Act 2015, as opposed to the 2006 Regulations and prescribes the Head of Actuarial Function as a new PCF for all (re)insurers subject to Solvency II and removes the prior PCF roles of Chief Actuary and Signing Actuary for all (re)insurers other than special purpose reinsurance vehicles;
- amends the designation of "Chief Actuary" to "Head of Actuarial Function" and adds the designation "Head of Claims" in respect of specified PCFs;
- amends the reference to "Irish Stock Exchange Limited" and refers instead to "a Market Operator of a Regulated Market within the meaning of the European Communities (Markets in Financial Instruments) Regulations" and changes the designation of "Head of Markets Supervision" to "Head of Regulation";
- adds, in respect of an alternative investment fund manager: the following two categories (a) Head of Client Asset Oversight, and (b) Head of Investor Money Oversight;
- provides a list of PCFs in respect of Internally managed AIFs or alternative investment fund manager and adds to the list designated persons to whom an Alternative Investment Fund Manager or UCITS Management Company or Management Company of an AIF may delegate the performance of management functions and Head of Investor Money Oversight;
- adds "Head of Credit" to the list of PCFs, in respect of a Retail Credit Firm.
Central Bank feedback regarding consultation on authorisation and standards for credit servicing firms
The Feedback Statement summarises the responses received to the questions posed in CP96 and also explores the additional matters which respondents highlighted in their submissions. The purpose of the Feedback Statement is to outline how significant comments received have been dealt with in the finalised Authorisation Requirements and Standards for Credit Servicing Firms and the consequential amendments to the various Statutory Codes. It also outlines an additional requirement which the Central Bank has added to the finalised Authorisation Requirements and Standards for Credit Servicing Firms based upon its own review of its proposals in this regard.
Central Bank introduces consumer protection standards for credit servicing firms
The Central Bank has published the Authorisation Requirements and Standards that credit servicing firms will have to meet in order to be granted an authorisation. The requirements will apply both to new firms looking to set up as a credit servicing firm and to existing firms who are taken to be authorised under the transitional provisions provided under the Consumer Protection (Regulation of Credit Servicing) Act 2015.
Credit servicing firms will also have to demonstrate to the Central Bank that they have:
- Robust governance and adequate resources to ensure compliance;
- Agreements with loan owners that enable the credit servicing firm to fully comply with its obligations under Irish financial services legislation; and
- Adequate and effective control of loan servicing in the State to enable Central Bank oversight.
Central Bank publishes Authorisation Requirements and Standards for Credit Servicing Firms
The Consumer Protection (Regulation of Credit Servicing Firms) Act 2015 amends Part V of the Central Bank Act 1997 in order to introduce a regulatory regime for a new type of entity called a ‘Credit Servicing Firm’.
The Central Bank published a document on the Authorisation Requirements and Standards for Credit Servicing Firms. Part A of the document sets out the authorisation requirements that must be complied with by an applicant seeking authorisation to carry on Credit Servicing. Part B of the document contains a non-exhaustive list of certain other regulatory requirements which apply to Credit Servicing Firms and which Credit Servicing Firms should be aware of in relation to the provision of Credit Servicing.
The Central Bank has also published a Q&A document on credit servicing and an Addendum to the Minimum Competency Code to establish minimum competency standards for persons exercising a controlled function or a pre-approval controlled function in a credit servicing firm. The Central Bank has also published an Addendum to the Code of Conduct on Mortgage Arrears the purpose of which is to make clear that (as automatically arises as a matter of law) firms carrying on the activity of credit servicing, when managing and administering a mortgage loan book, are ‘regulated entities’ for the purposes of the CCMA with respect to that activity.
The Credit Union Restructuring Board adopts Credit Union Fund (ReBo Levy) Regulations 2015
The Credit Union Restructuring Board, with the consent of the Minister for Finance, has made the Credit Union Fund (ReBo Levy) Regulations 2015 which require credit unions to pay a ReBo levy to the account of the Credit Union Fund at the rate of—
- in relation to every credit union, 0.004428 per cent of its total assets, and
- in relation to a credit union to which financial assistance was advanced during the levy period, 50 per cent of the total amount so advanced.
Where one credit union has had its liabilities transferred to a second credit union during a levy period, the second credit union is liable to pay the ReBo levy in respect of both credit unions.
Minister for Finance adopts Credit Union Fund (Stabilisation) Levy Regulations 2015
The 2015 Regulations require each credit union to pay a credit union levy for the account of the Credit Union Fund at the rate of 0.022 per cent of the total assets of the credit union. The Regulations apply to every credit union that is a credit union on 1 January 2016. Credit unions are required to make such payment to the Minister not later than 26 February 2016.
EU & INTERNATIONAL
CPMI/IOSCO report on implementation monitoring of the principles for financial market infrastructures
CPMI and IOSCO have published a which presents the findings of the assessment of the completeness and consistency of frameworks and outcomes arising from jurisdictions’ implementation of the Responsibilities for authorities in the Principles for financial market infrastructures (PFMI). The PFMI are international standards for payment, clearing and settlement systems, and trade repositories.
The assessments covered implementation of the Responsibilities across all financial market infrastructure (FMI) types in 28 participating jurisdictions. The report found that a majority of the jurisdictions had achieved a high level of observance of the Responsibilities. 16 fully observed the five Responsibilities for all FMI types; 2 jurisdictions either fully or broadly observed each of the five Responsibilities for all FMI types. With respect to specific FMI types, jurisdictions most frequently fell short of a fully observed rating in the case of trade repositories (TRs). 5 of the participating jurisdictions had TR regimes that were still not ready for assessment. In addition, several other jurisdictions lacked clear criteria and/or fully disclosed policies to support their regulation, supervision and oversight of TRs. CPMI and IOSCO will review the Responsibilities in the light of the findings of this assessment and consider the need for additional guidance.
FSB to establish Task Force on Climate-related Financial Disclosures
The FSB has announced it is establishing a task force on climate-related financial risks. The Task Force on Climate-related Financial Disclosures (Task Force) will develop voluntary, consistent climate-related financial risk disclosures for use by companies in providing information to lenders, insurers, investors and other stakeholders.
The Task Force will seek to develop a set of recommendations for consistent, comparable, reliable, clear and efficient climate-related disclosures. The Task Force will take account of the work of other groups related to effective disclosures.
By the end-March 2016, the Task Force aims to determine the scope and high-level objectives for its work. By the end of 2016, the Task Force intends to focus on delivering specific recommendations for voluntary disclosure principles and leading practices, if appropriate.
Revenue Commissioners amend the Financial Accounts Reporting (United States of America) Regulations 2014
The Amending Regulation updates the definition of Financial Institution to remove the classifications of ‘Relevant Holding Company’ and ‘Relevant Treasury Company’. This change is required to accurately reflect the definition of Financial Institution contained in the Agreement between the Government of Ireland and the Government of the United States of America to Improve International Tax Compliance and to Implement FATCA.
EBA launches discussion paper on customer authentication and secure communication
The EBA and ECB have issued a discussion paper, so as to benefit from input by market participants on a number of issues that are relevant to the development of the technical standard on strong customer authentication and secure communication in advance of PSD 2 coming into effect. The EBA invites respondents to share their views on the identified issues and on the potential clarifications suggested.
The discussion paper invites views on issues related to strong customer authentication; the exemptions to the application of strong customer authentication; the protection of the personalised security credentials of the payment service users; the requirements for common and secure open standards of communication; and possible synergies with e-IDAs Regulation on electronic identities.
The publication of the subsequent consultation paper with the draft technical standard is foreseen for the second quarter of 2016.
Responses should be provided by 8 February 2016.
EBA consults on changes to financial reporting in accordance with IFRS 9
The CRR mandates the EBA to develop uniform reporting requirements on financial information (FINREP). These reporting requirements are included in Regulation (EU) No 680/2014 (ITS on supervisory reporting’). Reporting of financial information (FINREP) was originally based on accounting standards to achieve efficient regulation by aligning supervisory reporting with accounting standards. Therefore FINREP needs to be updated whenever the underlying international accounting standards are updated.
The consultation paper proposes the amendment of the ITS on supervisory reporting with regard to FINREP for IFRS reporters following the issuance of the new IFRS 9 standard.
It was also deemed necessary to review some parts of the FINREP framework based on experience using the data transmitted and feedback received from compiling institutions. Given the scope of the changes introduced by these draft ITS in the instructions and templates, the relevant Annexes are replaced in whole with those in the consultation paper, in order to have a consolidated version of the updated draft ITS package.
Responses should be provided by 8 March 2016.
EBA consults on separation of payment card schemes and processing entities
On 8 June 2015, the Interchange Fees for Card-Based Payment Transactions Regulation (IFR) entered into force in the European Union. In addition to the capping of interchange fees, the IFR also foresees the separation of payment card schemes and processing entities.
With the intention of addressing concerns that schemes offering processing services may grant their own processing services beneficial treatment to the detriment of processing competitors, Article 7(6) IFR confers on the EBA the mandate to develop draft RTS establishing the requirements that payment card schemes and processing entities have to comply with for ensuring independence of their accounting, organisation and decision-making process.
The draft RTS proposed in the Consultation Paper introduce specific requirements related to the independence of the organisation and the decision-making process in relation to the development of innovations, while ensuring that external processors are not prevented from having an opportunity to partner with the scheme to develop pilots for new innovative products.
The final RTS will be published after consultation.
Responses by 8 March 2016.
FATF leads renewed global effort to counter terrorist financing
In the light of recent terrorist attacks in Paris, FATF concluded three days of meetings, focussed on combatting the financing of ISIL and other terrorist groups.
FATF will adapt its strategy in order to better understand and reflect the changing nature of the terrorist financing risks, including by strengthening the existing measures, and enhancing operational information sharing to help counter these risks:
- Understanding the impact of recent action against ISIL by working closely with the UN, the Counter-ISIL Financing Group (CIFG), the Egmont Group, Interpol and other stakeholders. A joint meeting with CIFG will be held in February 2016.
- FATF will develop up to date terrorist financing indicators to share with the private sector. FATF will hold a meeting in February to consult private sector representatives on these indicators, and discuss how to enhance information exchange with national authorities.
- Improving the exchange of information. In order to achieve this FATF will conduct an immediate analysis across all members in order to review their understanding of the risks, the challenges faced in sharing information, and how countries have responded to those challenges. This will inform future actions.
- FATF and the Egmont Group will work together to overcome information sharing obstacles and consider updating the international standards on effective information sharing.
- FATF will also take immediate actions to improve information exchange between government authorities, between countries, and with the private sector.
- Strengthening the international standards and their implementation. FATF will initiate special follow-up measures for countries which have not criminalised terrorist financing or do not apply targeted financial sanctions.
- In February 2016, FATF will discuss if there are areas where the FATF Standards can be strengthened, such as better reflecting the United Nations Security Council Resolutions dealing with terrorist financing.
EBA consults on assessment methodology on the use of internal models for market risk
The EBA has launched a consultation on its draft Regulatory Technical Standards (RTS) that specify the conditions under which competent authorities assess the significance of positions included in the scope of market risk internal models, as well as the methodology that competent authorities shall apply to assess an institution's compliance with the requirements to use an Internal Model Approach (IMA) for market risk.
The draft RTS provide objective criteria to be applied in the assessment of the significance of those positions included in the scope of the internal model and propose two different methodologies for general and specific risk categories, both of them based on the standardised rules for market risk.
In addition, the draft RTS set out the standards for the assessment by competent authorities of an institution's compliance with IMA requirements when the institution applies to use an internal model to determine market risk capital requirements or introduces any material changes or extensions to the IMA approach already in use.
Responses should be provided by 13 March 2016.
EBA consults on cooperation and exchange of information for passporting under PSD2
The EBA has launched a consultation on its draft technical standards on the framework for cooperation and exchange of information between competent authorities for passporting notifications under the revised Payment Services Directive (PSD2).
Responses should be provided by 11 March 2016.
ESMA consults on access to data and aggregation and comparison of data across trade repositories
Regulation (EU) No 648/2012 on OTC Derivatives, CCPs and Trade Repositories (EMIR) requires ESMA to develop draft regulatory technical standards specifying the frequency and the details of information as well as operational standards required in order to aggregate and compare data across repositories and for access to information as appropriate.
In general, ESMA considers that the current functionalities offered for access to Trade Repositories data requires a significant improvement and that comparison of data is not sufficiently robust, which requires some elements to be fixed and improved. The consultation document outlines amendments to the current rules to ensure direct and immediate access to data and aggregation and comparison of data across trade repositories.
A final report will be prepared and submitted to the Commission which has three months from the receipt of a draft regulatory technical standard by ESMA to decide whether to endorse it.
Responses should be provided by 1 February 2016.
Agreement on Commission's EU data protection reform
The European Commission put forward its EU Data Protection Reform in January 2012 to make Europe fit for the digital age (IP/12/46). An agreement was found with the European Parliament and the Council.
The Reform package will put an end to the patchwork of data protection rules that currently exists in the EU.
The Reform consists of two instruments:
- The General Data Protection Regulation
The Regulation will enable people to better control their personal data, including:
- easier access to your own data
- a right to data portability (easier to transfer your personal data)
- a clarified "right to be forgotten"
- the right to know when your data has been hacked
The Regulation will also set down clear modern rules for business and provide for a single set of rules and a one-stop-shop approach whereby companies will only need to deal with one single supervisory authority. Companies based outside of Europe will have to apply the same rules when offering services in the EU. Privacy-friendly techniques such as pseudonomysation will be encouraged, to reap the benefits of big data innovation while protecting privacy. The reform will scrap notifications to supervisory authorities entirely. Where requests to access data are manifestly unfounded or excessive, SMEs will be able to charge a fee for providing access. SMEs are exempt from the obligation to appoint a data protection officer insofar as data processing is not their core business activity. SMEs will have no obligation to carry out an impact assessment unless there is a high risk.
- The Data Protection Directive for Police and Criminal Justice Authorities
The Directive will ensure that the data of victims, witnesses, and suspects of crimes, are duly protected in the context of a criminal investigation or a law enforcement action. More harmonised laws will facilitate cooperation of police or prosecutors to combat crime and terrorism.
The final texts will be formally adopted by the European Parliament and Council at the beginning 2016. The new rules will become applicable two years thereafter.
EBA defines harmonised prudential requirements for Central Securities Depositories
The EBA published its draft Regulatory Technical Standards (RTS) on prudential requirements for Central Securities Depositories (CSDs) which define a prudential framework for CSDs and harmonise calculations for their capital requirements.
The EBA specifies the framework for determining capital requirements for all CSDs along with additional requirements that will only apply to those CSDs offering banking-type ancillary services. Those CSDs providing banking-type of ancillary services will need to comply with the additional capital requirements laid down in the Capital Requirements Regulation (CRR). As a consequence, the EBA considered the possible differences between the CRR and Central Securities Depositories Regulation (CSDR) regimes so as to ensure that stricter rules on prudential supervision apply, as required by the CSDR, without duplicating the existing applicable prescriptions in the CRR.
For CSDs offering banking-type ancillary services and licensed as a credit institution, the EBA also includes in its RTS the methodology for determining how an additional risk-based capital surcharge should be calculated.
ESMA publishes updated questions and answers on the application of the Credit Rating Agencies Regulation
On 16 December 2015, ESMA published its updated questions and answers on the application of the Credit Rating Agencies Regulation.
Central Bank publishes Corporate Governance Requirements for Credit Institutions
The Central Bank has published new Corporate Governance Requirements for Credit Institutions (the Requirements). The Requirements supersede the previous Corporate Governance Code for Credit Institutions and Insurance Undertakings; splitting the previous Code and separating out the requirements for credit institutions into the new Requirements. The Requirements apply to credit institutions with effect from 11 January 2016.
ESMA publishes Final Report on guidelines for the assessment of knowledge and competence
Following a public consultation, and for the purpose of providing guidelines specifying criteria for the assessment of knowledge and competence of investment firms’ personnel, ESMA has published its final report on guidelines which sets out the responses to the public consultation and the final Guidelines, amended in light of the responses received. The guidelines will come into effect on 3 January 2017.
ESAs seek stakeholder input on automation in financial advice
The three European Supervisory Authorities (ESAs) – EBA, EIOPA and ESMA – have launched a Discussion Paper on automation in financial advice, aimed at assessing what, if any, action is required to mitigate the associated risks. The Discussion Paper explains the concept of automation in financial advice, where a financial institution provides advice or recommendations to consumers without, or with very little, human intervention and relies instead on computer-based algorithms and/or decision trees, and highlights potential benefits and risks associated with this particular innovation.
The closing date for responses is 4 March 2016.
For further information please contact a member of the Financial Regulation team.
Date published: 04 Janaury 2016