Tracker, Financial Services Regulation & Compliance - Cross Sectoral / Other
Central Bank publishes findings of Cyber Security / Operational Risk Thematic Inspection
The Central Bank recently concluded a thematic inspection in relation to Cyber Security / Operational Risk and the results have been communicated to the boards and senior management of investment firms, funds, fund service providers and stock-brokers. The Director of Markets Supervision, Gareth Murphy said: "The Central Bank will use its supervisory powers to ensure that remedial action is taken in those firms where significant weaknesses were uncovered in the recent themed inspection."
CCPC publish merger Q&A with Director of Legal Services
The Director of Legal Services at the Competition and Consumer Protection Commission (CCPC) acknowledged concerns amongst the legal community that the individual financial threshold of €3 million triggering a notification requirement is too low, placing an unnecessary and disproportionate burden on the SME sector. The CCPC believes it is too early at this stage to say whether the new thresholds have fully achieved their objective of re-focusing the legislation on transactions that may substantially lessen competition in Ireland. The Director of Legal Services anticipates that by the end of 2015, the CCPC will be in a better position to assess whether there is merit in some of these comments, noting, however, that any change to the thresholds would require the enactment of amending legislation.
Central Bank publishes Pre-Approval Controlled Functions (PCFs) guidance for Credit Unions
The Fitness and Probity regime for credit unions has been implemented in two phases. The second phase commenced on 1 August 2015, bringing credit unions with total assets of €10 million or less within the scope of the regime. The Central Bank has published a guidance document in respect of Credit Unions with total assets of €10 million or less. The guidance document sets out how a credit union can notify the Central Bank of the individuals who were in situ in PCF roles as at 1 August 2015 and how the Credit Union can confirm that the required due diligence has been undertaken (i.e. the PCF In Situ Return)
ASAI publishes Code of Standards for Advertising and Marketing Communications in Ireland
The ASAI published the 7th edition of the ASAI Code of Standards for Advertising and Marketing Communications in Ireland (effective from 1 March 2016). It is the result of a comprehensive review undertaken by the ASAI. The Code has been designed to be compatible with current legislation in Ireland and the EU with the intention that, through the co-operation of the ASAI with statutory regulators and state agencies, the combination of self-regulation and statutory legislation can be used to the best advantage of consumers and responsible advertisers. The ever changing complexities of modern-day Irish business and Irish society will require regular inspection and appraisal of the Code.
Central Bank publishes external review of its regulation and supervision of credit unions
The Central Bank has published the outcome of an external review by the International Credit Union Regulators’ Network (ICURN) of the performance of its functions in relation to credit unions. ICURN. Key findings include a recommendation that PRISM be adapted as appropriate for the credit union sector and that the Central Bank refocus its attention and resources on key risks, particularly credit risk, that have real potential to cause material damage to its objectives. ICURN observed that "[p]oor-quality underwriting and a failure to understand and apply the principles of sound lending have been, and remain, significant problems for many Irish credit unions".
Director of Market Supervision, Gareth Murphy on regulatory perspectives on financial technologies
On 8 September, the Central Bank published a speech by Gareth Murphy (Director of Market Supervision) on regulatory perspectives on financial technologies. It was noted that technology is changing the risks that financial authorities face, especially systemic risk and that cyber-security is currently a focus for the Central Bank in light of the increased incidence of attacks on personal and corporate IT systems globally. Mr. Murphy spoke about new distribution technologies, identity verification technologies, and new technologies for registering ownership of assets and the challenging questions raised in respect of existing models of regulatory engagement. Mr. Murphy concluded by noting that in light of financial authorities' mandate to safeguard stability and consumers and the rate at which technological change is affecting the nature of financial services, capability must be created to take timely and proportionate action, where necessary. Mr. Murphy also noted the need for financial authorities to adapt to face the significant challenges of resourcing, co-ordination and organisation.
EU & INTERNATIONAL
EU extends the validity of sanctions over actions against Ukraine's territorial integrity
The Council prolonged by 6 months the application of EU restrictive measures targeting actions against Ukraine's territorial integrity, sovereignty and independence. The asset freeze and travel bans against 149 persons and 37 entities have been extended until 15 March 2016. One deceased person was removed from the list.
Commission publishes roadmap concerning Green Paper on retail financial services and insurance
On 7 September the European Commission published a roadmap concerning its Green Paper on retail financial services and insurance. The overall objective of the Green Paper on Retail Financial Services and Insurance is to consult stakeholders on the obstacles providers and consumers face when offering or purchasing financial services across the EU. The Green Paper consultation will seek stakeholders’ views on how to bring about better outcomes for consumers and firms in terms of better access, more transparent markets, increased competition as well as greater consumer choice and improved consumer protection (on a domestic and cross-border level) in an increasingly digital environment. In particular, the paper will seek to identify the barriers in the market and investigate the means, including the state of the art technological and innovative solutions, to further improve the functioning of the EU Single Market for providing, purchasing and using retail financial services and insurance. The Green Paper will cover topics such as digitalisation, fragmented markets and insufficient competition, and Capital Markets Union.
EU - US joint State financial markets regulatory dialogue
Participants in the Financial Markets Regulatory Dialogue (FMRD) met on 18 September 2015 to exchange information on regulatory developments as part of their ongoing dialogue. The next FMRD meeting will take place in Washington, D.C., in February 2016.
EU participants presented the outlines of the EU’s efforts to facilitate access to market-based finance through the creation of a capital markets union. In this context, the EU participants presented the EU plans to review the Prospectus Directive. EU and US participants reported that respective bilateral discussions regarding CCPs, notably regarding recognition under EMIR, were continuing in a constructive manner. EU participants reiterated their concerns about the effect of the Volcker Rule on foreign funds and urged the US participants to find a solution to the remaining important issue regarding foreign private funds in a timely manner. With respect to bank resolution, US and EU participants look forward to the Financial Stability Board’s finalisation of a proposal for an international minimum standard on total loss absorbing capacity (TLAC) in time for the G20 Leaders’ Summit in 2015. Participants discussed the options for cross-border cooperation on the resolution of CCPs. Regarding the ongoing international review of benchmarks, EU participants noted that EU legislators strive to create a framework which would allow well-governed benchmarks with solid checks on data inputs to be eligible for use in the EU. Participants committed to develop further cooperation on audit oversight through a sustainable process to avoid unnecessary duplication, and look forward to the prospect of the European Commission’s renewal of the Adequacy Decision. Participants stressed the need to develop policy responses to address cybersecurity risks to the financial sector.
UK FCA launches new financial services register and FCA Handbook website
The new Financial Services Register makes it easier to find information on firms, individuals and other bodies that are, or have been, regulated by the PRA and/or the FCA. Firms that are reported to be providing regulated products or services without the required authorisation are included in the Register for the first time. These firms are highlighted in search results by red text and a warning symbol to make clarify the status of such firms. The FCA has also launched a new Handbook website on 29 August 2015.
UK FCA publishes quarterly online consultation form for amendments to FCA Handbook
The FCA is seeking responses to proposed miscellaneous amendments to the Handbook relating to proposals to (a) make changes in relation to offshore life insurance bonds, (b) make minor changes across the Handbook to implement the Mortgage Credit Directive, (c) make minor changes to the TC list of appropriate qualifications, (d) update FSA guidance on Consumer Redress Schemes and incorporate it into CONRED, (e) make minor amendments to SUP Chapter 16 to improve the data collection process for both firms and the FCA, (f) make changes to the DISP rules to make complaints reporting requirements more consistent and clear, make changes to the Glossary, LR, DTR, PR, GENPRU and SUP in light of the SAAD and make some miscellaneous amendments to these sections, and (g) make technical amendments to provisions in GEN. The FCA has staggered the deadlines for responses in relation to the various amendments referred to above, the earliest of which is 5 October 2015.
UK FCA seeks comments on forms for regulatory approval of certain roles
The FCA and the PRA are introducing a new accountability regime for deposit-takers, insurers and PRA-designated investment firms. The regulators have consulted on amendments to a series of forms used by firms and individuals relating to regulatory approval for certain roles. Following receipt of feedback regarding the necessity of some of the questions asked in these forms, the paper sets out proposed amendments to two forms for the new regime and to two forms used in the current Approved Persons Regimes. The regulators have requested comments on the proposals by 19 October 2015.
UK FCA seeks comments on guidance for implementation of ring-fencing
The FCA is seeking comments on its proposed general guidance on its approach to the implementation of ring-fencing in the UK, including its approach in relation to ring-fencing transfer schemes (RFTSs) by 30 October 2015. The guidance consultation is relevant to banking groups that are required by the Financial Services and Markets Act 2000 to establish a ring-fence for their retail banking activities aimed at isolating those activities from investment banking activities.
UK PRA consultation on proposal to apply audit committee requirements to Lloyd's of London
The PRA is seeking comments by 18 December 2015 in relation to the PRA's proposed rules to implement the audit committee requirements of article 39 of the Statutory Audit Directive. It is proposed to apply the requirements of article 39 (requiring Member States to ensure that each public-interest entity has an audit committee) to the Lloyd’s market by applying the requirements to the Society of Lloyd’s and managing agents. The PRA also proposes to extend the scope of the requirements to UK designated investment firms. The consultation is relevant to banks, building societies and UK Solvency II insurance and reinsurance firms.
Payments UK publishes voluntary code for indirect access to UK payment systems for PSPs
The principal aim of the Code is to improve the experience of Indirect Payment Service Providers (Indirect PSPs) by clearly setting out the responsibilities of Indirect Access Providers that have subscribed to the Code. The Code is voluntary and has been developed by Payments UK on behalf of the industry, and in association with the industry’s primary Indirect Access Providers – Barclays, HSBC, Lloyds Banking Group and RBS – and in discussion with the Payment Systems Regulator (PSR). Payments UK will be conducting a formal consultation on the Code in late 2015. Feedback from this consultation will be considered in the further development of the Code for publication next year.
CPMI and World Bank issues report examining payment aspects of financial inclusion
The Committee on Payments and Market Infrastructures (CPMI) and the World Bank Group issued a consultative report on payment aspects of financial inclusion. Financial inclusion efforts - from a payment perspective - should ensure that all individuals and businesses have access to and are able to use at least one transaction account operated by a regulated payment service provider, to: (a) perform their payment needs; (b) safely store some value; and (c) serve as a gateway to other financial services. The report examines demand and supply-side factors affecting financial inclusion in the context of payment systems and services, and suggests measures to address these issues.
The report outlines seven guiding principles designed to assist countries that want to advance financial inclusion in their markets through payments: (a) commitment from public and private sector organisations; (b) a robust legal and regulatory framework underpinning financial inclusion; (c) safe, efficient and widely reachable financial and ICT infrastructures; (d) transaction accounts and payment product offerings that effectively meet a broad range of transaction needs; (e) availability of a broad network of access points and interoperable access channels; (f) effective financial literacy efforts; and (g) the leveraging of large-volume and recurrent payment streams, including remittances, to advance financial inclusion objectives.
CPMI-IOSCO issue consultative report on harmonisation of the Unique Transaction Identifier (UTI)
In line with their mandate to improve transparency, mitigate systemic risk and protect against market abuse, the Committee on Payments and Market Infrastructures (CPMI) and the International Organization of Securities Commissions (IOSCO) have published a consultative report titled Harmonisation of a first batch of key OTC derivatives data elements (other than Unique Transaction Identifier, UTI, and Unique Product Identifier, UPI). Following a 2014 feasibility study, the FSB asked the CPMI and the IOSCO to develop global guidance on the harmonisation of data elements reported to trade repositories (TRs) and important for the aggregation of data by authorities including the UTIs and UPIs. The report seeks comments on these proposals as well as responses to the general and specific questions by 9 October 2015.
ESMA consults on the European Single Electronic Format
ESMA launched its public consultation on its regulatory technical standards on the European Single Electronic Format (ESEF). The amended Transparency Directive requires issuers listed on regulated markets to prepare their annual financial reports (AFR) in an ESEF from 1 January 2020, with the objectives of making submission easier for issuers and facilitating accessibility, analysis and comparability for investors and regulators. ESMA seeks views on its preliminary cost-benefit analysis and the proposals that the AFR should be published in PDF format with, in addition, IFRS consolidated financial statements reported as structured electronic data in XBRL or iXBRL. The consultation closes on 24 December 2015.
ESMA publishes draft RTS on European Electronic Access Point
ESMA delivered its regulatory technical standards (RTS) on the European Electronic Access Point (EEAP), as required under the amended Transparency Directive, to the European Commission for endorsement. The objective of the EEAP is to provide an easy search and access tool for end-users looking for regulated information, such as annual reports, major shareholdings etc., on issuers admitted to trading on regulated markets in Europe. The EEAP will be a web-portal, built and operated by ESMA, to provide a single point of access at EU level to the regulated information stored by officially appointed mechanisms (OAM) in each Member State. Currently, end users must search each OAM individually. The EEAP will be developed over the next couple of years and made available to end-users after 1 January 2018. ESMA encourages OAMs to start preparing for implementation at national level as soon as possible.
ESMA readies MiFID II, MAR, and CSDR
ESMA published its final technical standards (TS) on some of the most important pieces of post-crisis financial regulation: the Markets in Financial Instruments Directive (MiFID II), the Market Abuse Regulation (MAR) and the Central Securities Depositaries Regulation (CSDR). The new technical standards will alter the functioning of European financial markets by increasing their transparency, safety and resilience as well as investor protection.
MiFID II to increase market transparency, efficiency and safety
The rules ESMA is delivering on MiFID II will bring the majority of non-equity products into a robust regulatory regime and move a significant part of OTC trading onto regulated platforms. The key rules introduce:
- Fairer, safer and more efficient markets (including tests on non-financial firms' investment activities, rule governing high frequency trading, and ranges for the new EU-wide commodity derivatives position limits regime)
- Greater transparency (including thresholds for the pre- and post-trade transparency regimes extended to equity-like instruments, bonds, derivatives, structured finance products and emission allowances, a newly introduced liquidity assessment for non-equity instruments, and new trading obligation for shares and certain derivatives to be traded only on regulated platforms and, in the case of shares, and reporting requirements for commodity derivatives).
- Stronger investor protection (including improved disclosure to strengthen the best execution regime).
MAR to increase market integrity and investor protection
ESMA’s MAR TS will strengthen the existing market abuse framework by extending its scope to new markets, platforms and behaviours. They contain prohibitions for insider dealing and market manipulation, and provisions to prevent and detect these.
CSDR to harmonise functioning of European central securities depositories
The CSD Regulation harmonises the authorisation and supervision of central securities depositories (CSDs) within the EU. It provides organisational, conduct of business and prudential requirements to ensure CSDs are safe, efficient and sound. It also introduces a settlement discipline regime, including measures to prevent and address settlement fails, such as a mandatory buy-in and cash penalties as well as reporting requirements for internalised settlement. ESMA’s TS, which translate CSDR provisions into applicable rules, cover harmonised CSD requirements, and internalised settlement reporting.
ESMA’s different sets of final draft TS have been sent for endorsement to the European Commission. The Commission now has three months to approve these. Once endorsed, both the European Parliament and the Council have an objection period. After CSDR, which entered into force back in 2014, MAR and MiFID II will enter into force in 2016 and 2017 respectively.
ESMA publishes final report on MiFID II/MiFIR draft regulatory and implementing technical standards
MiFID II and MiFIR require ESMA to develop a multitude of Regulatory Technical Standards (RTS) and Implementing Technical Standards (ITS). With this report ESMA published its final proposals for a total of 28 draft technical standards. The final report deals with technical standards from the areas of transparency (Standards 1-5), market microstructure (Standards 6-12), data publication and access (Standards 13-16), requirements applying on and to trading venues (Standards 17-19), commodity derivatives (Standards 20 and 21), market data reporting (Standards 22-25), post-trading (Standard 26) and investor protection (Standards 27 and 28). It describes the feedback received in the public consultations and the rationale behind ESMA’s final proposals.
Pensions Authority publishes EIOPA call for expression of interest in EIOPA stakeholder groups
The Pensions Authority has published The European Insurance and Occupational Pensions Authorities (EIOPA) Call for Expression of Interest regarding the setting up of EIOPA Stakeholder Groups, the Insurance and Reinsurance Stakeholder Group (IRSG) and the Occupational Pensions Stakeholder Group (OPSG), in advance of the expiration of their mandates early next year.
Chair of the ESA provides update on the RTS under the PRIIPs Regulation
On 14 September, Mr. Steven Maijoor, Chair of the European Supervisory Authorities (ESAs) delivered a statement to the Economic and Monetary Affairs Committee (ECON) of the European Parliament in relation to the work on the regulatory technical standards (RTS) under the Regulation on Packaged Retail and Insurance-based Investment Products (PRIIPs), expected to be published in November 2015.
For further information please contact a member of the Financial Regulation team.
Date published: 02 October 2015