Financial Services Regulatory Update – October 2024 Round Up

CBI publishes F&P Performance Report for H1 2024

On 17 October 2024, the Central Bank of Ireland (the “CBI”) published its fitness and probity (“F&P”) performance report (here) for H1 2024. The report provides information in relation to the processing of applications for pre-approval controlled functions (“PCFs”) during H1 2024. The report aims to help maintain transparency and clarity in the CBI’s assessment of PCF applications.

The CBI aims to approve PCF applications within 90 calendar days. During H1 2024, 80% of all PCF applications were approved within 90 calendar days. The average processing time was 53 calendar days, with the shortest period for assessment being one day and the longest period for assessment being 343 days. Notably, the CBI has demonstrated efficiency in processing PCF applications not linked to firm authorisations, with a 96% approval rate within the 90-day target.

For more information, see our briefing here.

Development of European Single Access Point

On 29 October 2024, the European Supervisory Authorities (the “ESAs”) published a final report (here) containing draft implementing technical standards (“ITS”) regarding certain tasks of the collection bodies and functionalities of the European Single Access Point (the “ESAP”). The ESAP is expected to start collecting information in July 2026; publication of information will start no later than July 2027.

The published draft standards are designed to enable future users to be able to access and use financial and sustainability information effectively and effortlessly via a centralised ESAP platform. The standards have been sent to the European Commission for adoption.

IRRD / Solvency II Amending Directive

The Council of the EU has published the agreed final texts of the Insurance Recovery and Resolution Directive (the “IRRD”), and the Directive amending the Solvency II Directive as regards proportionality, quality of supervision, reporting, long-term guarantee measures, macro-prudential tools, sustainability risks, and group and cross-border supervision (the “Solvency II Amending Directive”). On 5 November 2024, the Council gave its final approval to both measures, and the texts now await publication in the Official Journal of the EU.

The IRRD will establish an EU-wide recovery and resolution framework for insurance firms, similar to that already existing for banks, in order to:

• harmonise recovery and resolution tools and procedures across the EU, while protecting policy holders, beneficiaries, and claimants, and maintaining financial stability;
• promote cooperation between national authorities; and
• enable insurance and reinsurance undertakings to be recovered or wound down without the need for taxpayers to foot the bill.

According to the EU, the changes brought by the Solvency II Amending Directive will free up large amounts of capital, which insurance firms have had to keep in reserve, allowing the sector to channel more funds into economic recovery and towards realisation of the objectives of the European Green Deal. Currently, the cost-of-capital rate, which determines reserve levels, is assumed to be equal to 6%, whereas the update will bring the rate down to 4.75%.

The update will also simplify supervision, while empowering supervisors on systemic risks. At the initiative of the European Parliament, supervisors will be required to better cooperate with each other where insurers operate in other Member States.

The update includes new provisions requiring insurance firms to better take into account sustainability-related risks, and to report in more detail about such risks, to ensure policyholders can better understand firms’ green credentials.

Following publication in the Official Journal of the EU, and subsequent entry into force, EU Member States and industry will generally have two years to comply with the various reform measures.

CBI publishes guidance on PII requirements for retail intermediaries

On 9 October 2024, the CBI issued guidance (here) for retail intermediaries (including insurance, reinsurance and ancillary insurance intermediaries, investment intermediaries, and mortgage credit intermediaries) on the requirement to hold adequate levels of professional indemnity insurance (“PII”) cover.

Delegated Regulation (EU) 2024/896 amended the Insurance Distribution Directive (the “IDD”) with regard to the base euro amounts of PII applicable to insurance and reinsurance insurance intermediaries. The Delegated Regulation entered into force on 9 April 2024, and applies as of 9 October 2024.

EIOPA consults on technical standards following Solvency II review

On 1 October 2024, the European Insurance and Occupational Pensions Authority (“EIOPA”) launched a series of consultations on draft regulatory technical standards (“RTS”) and draft ITS as regards proposed changes to the prudential framework for insurance and reinsurance undertakings in the EU as part of the Solvency II review process.

The consultations relate to the following technical standards:

• draft RTS on liquidity risk management plans (here);
• draft RTS on the criteria for the identification of exceptional sector-wide shocks (here);
• draft RTS on undertakings under dominant or significant influence, or managed on a unified basis (here);
• draft RTS on relevant insurance and reinsurance undertakings with respect to the host Member State’s market (here); and
• draft ITS on scenarios for best estimate valuations for life insurance obligations (here).

Each consultation runs until 2 January 2025.

EIOPA consults on criteria for macroprudential analysis and the application of the prudent person principle

On 17 October 2024, EIOPA launched a consultation (here) regarding the criteria based on which national supervisors may request (re)insurers and insurance groups to perform macroprudential analysis in their own risk and solvency assessments (“ORSA”) and in their application of the “prudent person principle” (“PPP”). The consultation paper proposes both quantitative and risk-based criteria to determine which undertakings and groups should consider macroprudential elements in their ORSA and in how they apply the PPP.

EIOPA’s consultation runs until 9 January 2025.

CBI issues “Dear CEO” letter on MiFID II requirements on marketing communications

On 10 October 2024, the CBI published a “Dear CEO” letter (here) setting out the findings arising from a thematic review which examined investment firms’ application of marketing communications and advertising requirements, pursuant to the Markets in Financial Instruments Directive (“MiFID II”). The letter outlines CBI expectations and good practices in relation to the application of MiFID II marketing and advertising requirements.

In the light of the findings of its review, the CBI requests that all Irish authorised MiFID investment firms, credit institutions and fund management companies providing MiFID II services to retail clients:

• review their marketing and advertising practices against the report of the European Securities and Markets Authority (“ESMA”) report (here) on the application of MiFID II marketing and advertising requirements, and the findings, expectations and good practices set out in the schedule to the CBI “Dear CEO” letter. This review must be documented, and must include details of actions taken to address the findings in the ESMA report and the CBI letter. The review should be completed, and an action plan discussed and approved by the board of each firm by 31 January 2025, with the minutes of the relevant board meeting reflecting the discussions and board approval; and
• where the firm was in scope of the review and received formal mitigating actions, the feedback in the ESMA report, and the findings, expectations and good practices set out in the CBI letter should be considered in conjunction with mitigating actions.

ESMA launches consultation relating to MiFIR review

On 3 October 2024, ESMA launched a consultation (here) pursuant to its mandate under Regulation (EU) 2024/791 amending the Markets in Financial Instruments Regulation (“MiFIR”) (amending Regulation known as the “MiFIR review”). ESMA is seeking input on proposed amendments to the RTS under MiFIR for: (i) the reporting of transactions, and (ii) the maintenance of data relating to orders in financial instruments.

ESMA’s consultation runs until 3 January 2025.

Application of ESMA guidelines on funds’ names using ESG or sustainability-related terms

On 21 October 2024, the CBI published a notice of intention (here) regarding the application of ESMA’s guidelines (here) on funds’ names using ESG or sustainability-related terms. According to the notice, the CBI will, in due course, consult on the incorporation of related provisions in the UCITS Regulations and the AIF Rulebook. In the interim, the CBI expects full compliance with ESMA’s guidelines from 21 November 2024 (by fund managers of new funds). The guidelines apply from 21 May 2025 in respect of funds that existed prior to 21 November 2024.

For more information on ESMA’s guidelines, see our briefing here.         

Funds Sector 2030: publication of final report

On 22 October 2024, the Department of Finance published a final report (here) on the Funds Sector 2030 review. The report makes several recommendations, which aim to ensure that Ireland maintains its leading position in asset management and funds servicing, into the future. Included among the recommendations is the recommendation that the taxation of certain investment products be aligned with the capital gains tax rate of 33%, and the removal of the eight-year deemed disposal requirement.

Publication of RTS under ELTIF Regulation

On 25 October 2024, Delegated Regulation (EU) 2024/2759 (here) was published in the Official Journal of the EU. The Delegated Regulation contains RTS supplementing the Regulation on European long-term investment funds (the “ELTIF Regulation”) specifying when derivatives will be used solely for hedging the risks inherent to other investments of the ELTIF, the requirements for an ELTIF’s redemption policy and liquidity management tools, the circumstances for the matching of transfer requests of units or shares of the ELTIF, certain criteria for the disposal of ELTIF assets, and certain elements of the costs disclosure. The RTS entered into force on 26 October 2024.

ELTIF 2.0 – a revitalised regulatory framework designed to improve the uptake of European long-term investment funds (“ELTIFs”) – has applied on an EU-wide basis since 10 January 2024.  The entry into force of the technical standards underpinning ELTIF 2.0 is an important step towards operationalising a promising new framework that provides scope and opportunities for fund managers to present an attractive new product to clients with long-term investment strategies.

For more information on ELTIF 2.0, see our previous briefing here.

Council of the EU approves new sanctions framework

On 8 October 2024, the Council of the EU announced (here) that it has approved a new framework for restrictive measures in response to destabilising actions by Russia. According to the Council, the new framework will enable the EU to target individuals and entities engaged in actions and policies by the Russian government that undermine the fundamental values of the EU and its Member States, their security, independence and integrity, as well as those of international organisations and third countries.

Under the new framework, designated entities will be subject to an asset freeze, and EU citizens and companies will be forbidden from making funds available to them. In addition, designated natural persons will be subject to a travel ban, which will prevent them from entering or transiting through EU territories.

Initial Margin Model Authorisation under EMIR 3

On 29 October 2024, the EBA, in cooperation with EIOPA and ESMA, launched a survey (here) addressed to entities within the scope of the initial margin model authorisation regime, which will be introduced by the revised European Market Infrastructure Regulation (“EMIR 3”). The deadline for responses is 29 November 2024.

EMIR 3 is anticipated to come into force in Q4 2024. For more information, see our briefing here.

Delegated Acts under MiCA

On 31 October 2024, the European Commission adopted the following delegated acts containing RTS supplementing the Markets in Crypto-Assets Regulation (“MiCA”):

• Delegated Regulation (here) supplementing MiCA with regard to RTS specifying the procedure for the approval of a crypto-asset white paper;
• Delegated Regulation (here) supplementing MiCA with regard to RTS specifying the methodology to estimate the number and value of transactions associated to uses of asset-referenced tokens and of e-money tokens denominated in a currency that is not an official currency of a member state as a means of exchange;
• Delegated Regulation (here) supplementing MiCA with regard to RTS specifying the information to be included by certain financial entities in the notification of their intention to provide crypto-asset services;
• Delegated Regulation (here) supplementing MiCA with regard to RTS specifying the information to be included in an application for authorisation as a crypto-asset service provider (“CASP”);
• Delegated Regulation (here) supplementing MiCA with regard to RTS on continuity and regularity in the performance of crypto-asset services; and
• Delegated Regulation (here) supplementing MiCA with regard to RTS specifying the conditions for the establishment and functioning of consultative supervisory colleges.

For more information on MiCA and the regulation of crypto-assets, see our briefings here and here.

EBA Decision under MiCA on classifying ARTs / EMTs as “significant”

The EBA has published a Decision (here) under MiCA, dated 17 September 2024, on the procedure for the classification of asset-referenced tokens (“ARTs”) and e-money tokens (“EMTs”) as “significant”. Pursuant to Articles 43(2) and 56(1) of MiCA, the EBA is responsible for classifying ARTs and EMTs, respectively, as “significant”.  Following such a classification, the applicable supervisory powers will be generally transferred to the EBA, per Articles 43(7) and 56(6) of MiCA.

Proposed revisions to FATF Recommendations

On 28 October 2024, the Financial Action Task Force (“FATF”) launched a consultation (here) on proposed revisions to the FATF Recommendations, which set an international standard for AML/CFT measures. The proposed revisions are part of FATF’s programme of work to address unintended consequences of AML/CFT regulatory measures.

FATF's consultation runs until 6 December 2024.

Minister for Finance launches National Payments Strategy

On 15 October 2024, the Minister for Finance launched the National Payments Strategy, which sets out a roadmap for the future evolution of Ireland’s payments system, taking into account developments in digital payments, the continuing role of cash in society, and payment fraud. The full report can be accessed here. Submissions to the Department of Finance’s earlier consultation on the strategy can be viewed here.

EPC publishes VOP scheme rulebook

Following a public consultation (feedback statement here), the European Payments Council (the “EPC”) has issued the first version of the Verification of Payee (“VOP”) scheme rulebook (here), dated 10 October 2024. The rulebook is designed to support payment service providers (“PSPs”) across the Single Euro Payments Area (“SEPA”) in satisfying regulatory requirements outlined in the EU Instant Payments Regulation (the “IPR”) amending the SEPA Regulation.

EU Listing Act

The Council of the EU has given its final approval to the EU Listing Act. The legislative package was published in the Official Journal of the EU on 14 November 2024. The package comprises the following measures:

• Regulation (EU) 2024/2809 (here) amending the Prospectus Regulation, Market Abuse Regulation (“MAR”) and the Markets in Financial Instruments Regulation (“MiFIR”);
• Directive (EU) 2024/2810 (here) on multiple-vote share structures in companies that seek the admission to trading of their shares on an SME growth market; and
• Directive (EU) 2024/2811 (here) amending the Markets in Financial Instruments Directive (“MiFID II”) and repealing the Listing Directive.

The aim of the legislative package is to make EU public capital markets more attractive for EU companies, and to facilitate the listing of companies of all sizes, including SMEs, on European stock exchanges.

The various components of the Listing Act will enter into force on 4 December 2024. EU Member States will then have 18 months to transpose the Directive amending MiFID II into national legislation, and two years to transpose the Directive on multiple-vote shares.  Regulation (EU) 2024/2809 will apply from the date of entry into force, subject to certain provisions that are expressed to apply from 15 months after the date of entry into force.

European Commission consults on EU securitisation framework

On 9 October 2024, the European Commission launched a targeted consultation (here) on the functioning of the EU Securitisation Regulation (and wider EU securitisation framework).

• The consultation seeks market participants’ feedback on a broad range of issues, including:
• the effectiveness of the securitisation framework;
• the scope of application of the Securitisation Regulation;
• due diligence requirements;
• transparency requirements and the definition of “public securitisation”;
• supervision;
• the STS standard;
• the securitisation platform;
• prudential and liquidity treatment of securitisation for banks;
• prudential treatment of securitisation for insurers; and
• the prudential framework for institutions for occupational retirement provision (“IORPs”) and other pension funds.

The consultation runs until 4 December 2024.

ESMA issues statement on shortening standard settlement cycle for securities

On 15 October 2024, ESMA issued a statement (here) on shortening the standard securities settlement cycle in the EU. ESMA has been mandated to assess the appropriateness of shortening the settlement cycle in the EU, in the light of other jurisdictions’ transitions to a shorter standard settlement cycle (namely, T+1).

ESMA will deliver a report to the Council of the EU and the European Parliament in the coming months; however, preliminary findings indicate that shortening the standard settlement cycle for securities would help to promote settlement efficiency.

Selected Consultations, Discussion Papers, Speeches and Reports Published

Basel Committee on Banking Supervision (“BCBS”) – 2023 Banking Turmoil and Liquidity Risk: Progress Report (here)

CBI – Special Purpose Entities: Registration Guidelines (here); FAQs on Statistical Reporting Requirements (here); Quarterly Reporting: Notes on Compilation (here)

EBA – Final Report on Redemption Plans under Articles 47 and 55 of MiCA (here)

EBA – Report on Credit Insurance (pursuant to mandate under Article 506 of the Capital Requirements Regulation) (here)

EBA – Work Programme 2025 (here)

ESAs – Joint Work Programme 2025 (here)

ESAs – Report on Principal Adverse Impact Disclosures under the Sustainable Finance Disclosure Regulation (here)

ESMA  – Manual on Post-Trade Transparency (updated October 2024) (here)

ESMA – Sustainable Finance: Implementation Timeline (here) 

ESMA – Report on Sanctions and Measures imposed in 2023 (here)

European Commission – Fourth Annual Report on FDI Screening into the EU and its Member States (here)

International Organization of Securities Commissions (“IOSCO”) – Investor Education on Crypto-Assets (here)

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