Financial Services Regulatory Update – July 2024 Round Up

First Phase of SEAR takes effect

As of 1 July 2024, the Senior Executive Accountability Regime (“SEAR”) has taken effect for credit institutions, certain insurance undertakings, and certain investment firms, as well as incoming third-country branches of those firms.

SEAR is a key component of the Central Bank of Ireland’s (the “CBI’s”) Individual Accountability Framework (the “IAF”). SEAR requires in-scope firms to set out clearly and fully where responsibility and decision-making lie within the firm’s senior management. It imposes a legal duty of responsibility on persons carrying out pre-approval controlled function (“PCF”) roles in such firms. As of 1 July 2024, SEAR applies in respect of executive PCF roles within in-scope firms.

SEAR is being introduced on a phased basis. Notably, SEAR’s applicability to (independent) non-executive directors (“(I)NEDs”) has been deferred until 1 July 2025.

For more information, see our IAF hub (here) and the SEAR Regulations (here).

Independent Review of the F&P Regime

On 11 July 2024, the CBI published a report (here) outlining the findings of an independent review of the Fitness and Probity (“F&P”) regime. Speaking at the publication of the report, CBI Governor Gabriel Makhlouf confirmed that the CBI will accept all recommendations arising from the review, commenting that reform of the F&P regime will help ensure that it can continue to perform its key role into the future.

The CBI’s decision to commission an independent review of the F&P regime followed a decision (AB v Central Bank of Ireland) by the Irish Financial Services Appeals Tribunal (“IFSAT”), which identified “fundamental procedural flaws” regarding the CBI’s handling of specific applications to perform certain PCF roles. Recommendations, detailed in the report, relate to the following areas:

1. Fostering Industry Role in Gatekeeping;
2. Clear F&P Standards;
3. Governance;
4. Decision-making;
5. Communication and IT Platform;
6. Interview Stage;
7. Efficiency of Interview Process;
8. Withdrawals / Feedback;
9. Management of Information;
10. Quality Assurance;
11. Complaints Procedure; and
12. Training.

According to Governor Makhlouf, the CBI is “immediately looking to [its] implementation approach”. The CBI will implement the recommendations over the coming months, aiming for full implementation by the end of 2024.

For a detailed overview of the findings of the review, see our briefing here.

Increase in Female Representation at Senior Levels of Financial Services Firms

On 11 July 2024, the Economic and Social Research Institute (the “ESRI”) published its second annual report (here) on Ireland’s Women in Finance charter. The report highlights progress made by signatory financial services firms in relation to the proportion of women represented in management and board level positions.

The Women in Finance charter is an industry initiative supported by the Government of Ireland pursuant to the Ireland for Finance strategy.

McCann FitzGerald LLP is a proud signatory to the Women in Finance charter.

CBI Open Data Portal

On 16 July 2024, the CBI announced that it has launched an open data portal (accessible here) that will make accessible CBI data in respect of a broad range of financial matters, in support of various aspects of the CBI’s mandate. The portal contains data on areas that include:

• credit and deposits;
• mortgage arrears;
• interest rates;
• investment funds;
• securities markets developments;
• quarterly financial accounts;
• the insurance and pension fund sectors; and
• the National Claims Information Database (the “NCID”).

Transposition of Corporate Sustainability Reporting Directive

On 5 July 2024, the European Union (Corporate Sustainability Reporting) Regulations 2024 (here) were signed into law by the Minister for Enterprise, Trade and Employment, transposing the Corporate Sustainability Reporting Directive (the “CSRD”). The Regulations entered into effect on 6 July.

The CSRD requires all large companies and all listed companies (except listed micro-enterprises) to report sustainability information in accordance with the European Sustainability Reporting Standards (the “ESRS”) in their directors’ reports. Sustainability reporting must be provided with an auditor’s opinion with limited assurance and be reported digitally.

The new rules will be phased in for financial years from 2024-2028. Companies already required to report under the Non-Financial Reporting Directive (the “NFRD”) will be required to report in accordance with the CSRD in 2025 based on FY2024.

Publication of Corporate Sustainability Due Diligence Directive

On 5 July 2024, the Corporate Sustainability Due Diligence Directive (the “CS3D”) (here) was published in the Official Journal of the EU.

The CS3D introduces new obligations for in-scope companies to identify and, where necessary, prevent, end, or mitigate adverse impacts of their activities on human rights and on the environment. The rules concern not only the companies’ operations, but also the activities of their subsidiaries, and those of their business partners along the companies’ chain of activities.

The CS3D entered into force on 25 July 2024. From the date of entry into force, EU Member States have two years to transpose the CS3D, with substantive requirements to apply in accordance with the phase-in timeline from 2027.

For a detailed overview of the CS3D, see our earlier briefing here.

ESMA Guidelines on Enforcement of Sustainability Information

On 5 July 2024, ESMA published a final report (here) containing guidelines on the supervision of sustainability reporting by national competent authorities (“NCAs”), in accordance with the CSRD. The guidelines will apply from two months after their publication on ESMA’s website in all official EU languages. NCAs will then have to notify ESMA as to whether they comply, or intend to comply, with the guidelines.

ESMA has also published a public statement (here) on the application of the ESRS.

ESMA Opinion on EU Sustainable Finance Framework

On 24 July 2024, ESMA issued an Opinion (here) on the functioning of the EU sustainable finance framework. ESMA has developed its Opinion to improve the usability and coherence of the framework, and to facilitate EU investors in adopting sustainable investment strategies. ESMA’s Opinion takes into account the European Supervisory Authorities’ (the “ESAs’”) Opinion (here) on the assessment of the Sustainable Finance Disclosure Regulation (the “SFDR”).

Publication of Access to Cash Bill

On 31 July 2024, the Minister for Finance issued a statement (here) welcoming the publication of the Finance (Provision of Access to Cash Infrastructure) Bill 2024 (here). The Bill aims to ensure that sufficient and effective access to cash is available in the State, and that any further evolution of the cash infrastructure will be managed in a fair, orderly, transparent and equitable manner for all stakeholders.

The Bill requires compliance with regional criteria that set the minimum numbers of ATMs per 100,000 people, and the proportion within 10km of an ATM and a cash service point. Responsibility for compliance rests with “designated entities”; those will be the three main retail banks in the first instance.

The Bill will also, for the first time, regulate ATMs with the objective of improving operational standards and ensuring good customer service.

Delay to Application of Market Risk Reforms

On 24 July 2024, the European Commission adopted a Delegated Regulation (here) delaying the application date of market risk reforms, known as the Fundamental Review of the Trading Book (“FRTB”), in the EU, by one year until 1 January 2026. This date would align with the anticipated application date of the Basel III standards in the US.

The European Commission has also published a Q&A document (here) explaining its decision to defer application of aspects of the Basel III reforms.

EBA clarifies the Operational Application of CRR III in relation to Credit Risk Modelling

On 17 July 2024, the European Banking Authority (the “EBA”) issued a statement (here) welcoming the publication in the Official Journal of the EU of the EU banking package (comprising a revised Capital Requirements Regulation (“CRR III”) and a revised Directive (“CRD VI”)). To ensure a smooth operational implementation of the banking package, the EBA encourages credit institutions to:

• communicate to competent authorities the targeted model landscape, in particular following the migration of exposures to the foundation approach and standard approach. A key aspect is to ensure that rating systems perform adequately on their scope of application;
• assess and categorise changes coming from the implementation of the CRR III that impact the performance of a rating system according to Delegated Regulation (EU) 529/2014 on the materiality of changes to the internal ratings-based (“IRB”) approach. Changes coming from the implementation of CRR III that do not impact the performance of a rating system should not be considered under the scope of Delegated Regulation (EU) 529/2014;
• share with competent authorities an implementation plan on the foreseen modelling updates that are linked to future EBA supervisory products. In this context, modelling updates in relation to credit conversion factor (“CCF”) parameters may not need to be prioritised until the date of application of the EBA guidelines on IRB-CCF.

ECB concludes Stress Test of Banks’ Cyber Resilience

On 26 July 2024, the European Central Bank (the “ECB”) concluded its cyber resilience stress test, which gauged how banks supervised by the ECB would respond to, and recover from, a severe but plausible cybersecurity incident.

According to the ECB’s press release (here), the stress test showed, overall, that banks have response and recovery frameworks in place; however, areas for improvement remain. The ECB says that the findings will feed into the supervisory review and evaluation process (“SREP”) for 2024, and that the exercise has helped increase banks’ awareness of the strengths and weaknesses of their cyber resilience frameworks.

An FAQ document on the exercise is available here.

EBA publishes Draft Methodology and Guidance relating to 2025 EU-wide Stress Test

On 5 July 2024, the EBA published for informal consultation its draft methodology, templates, and guidance (available here) for the 2025 EU-wide stress test. The materials build upon the methodology used for the 2023 exercise, with improvements reflecting new insights and regulatory changes.

Some important changes have been included, notably (i) the integration of CRR III, set to be implemented on January 1, 2025, and (ii) the European Commission’s announcement to postpone, by one year, until 1 January 2026, the application date for the FRTB.

This step marks the beginning of a dialogue between the EBA and the EU banking industry. 68 banks from the EU and Norway, including 54 from the euro area, will participate in the exercise, capturing 75% of the EU banking sector.

EBA publishes Draft ITS on Supervisory Reporting Framework

On 9 July 2024, the EBA published (here) final draft implementing technical standards (“ITS”) on supervisory reporting requirements, implementing the changes necessary to keep the supervisory reporting framework relevant and aligned with CRR III (which implements the latest Basel III reforms). The draft ITS will enable supervisors to have sufficient comparable information to monitor compliance by institutions with CRR III requirements, thus further promoting enhanced and consistent supervision.

The ITS update the EBA supervisory reporting framework by including new or amended CRR III requirements on the output floor, credit risk, market risk, credit valuation adjustment (“CVA”) risk, leverage ratio, and on the transitional treatment of exposures to crypto-assets. On operational risk, the ITS include some minimum reporting requirements; according to the EBA, more extensive reporting requirements on operational risk will be finalised by the end of this year, together with a new framework for the business indicator for operational risk.

The ITS will be submitted to the European Commission for endorsement.

EBA Report on Convergence of Supervisory Practices; Key Topics for 2025 ESEP

On 8 July 2024, the EBA published its report for 2023 (here) on convergence of supervisory practices.

The EBA confirms that the key topics identified for supervisory attention in 2023 were adequately incorporated in the activities of most competent authorities; however, according to the EBA, there is still disparity in the implementation of risk areas such as ESG and data aggregation capabilities in the supervisory processes. Regarding the convergence of supervisory practices in the context of Pillar 2 and liquidity measures, the EBA’s analysis shows that there is still scope for further consistency across EU Member States in the identification and treatment of risks covered by Pillar 2 requirements.

In addition, on 8 July 2024, the EBA published a report (here) on the European Supervisory Examination Programme (“ESEP”) for 2025, which identifies key topics for heighted supervisory attention by competent authorities across the EU.

Key topics for 2025 include: (i) testing and adjusting to increasing economic and financial uncertainties; (ii) digital challenges, in particular ICT risk management and building operational resilience towards the digital transformation; and (iii) transitioning towards Basel III and the EU banking package implementation.

ITS on the Mapping of Credit Assessments of ECAIs

On 5 July 2024, Implementing Regulation (EU) 2024/1872 (here) was published in the Official Journal of the EU. The Implementing Regulation contains amending ITS in respect of the mapping tables specifying the correspondence between the credit risk assessments of external credit assessment institutions (“ECAIs”) and the credit quality steps set out under the CRR.

EBA consults on ITS amending Reporting Framework for Resolution Planning

On 30 July 2024, the EBA launched a consultation (here) on draft ITS amending the EBA’s resolution planning reporting framework.

The main proposals detailed in the consultation paper include:

• amending the submission deadline for reporting from April 30 to March 31;
• an extension of the scope of entities for which data is collected; and
• an expansion of the information requested on certain topics, in particular organisational structure, granular liability data, critical functions, financial markets infrastructures data, critical services, and critical information systems.

The EBA’s consultation runs until 30 October 2024.

EBA consults on Technical Standards on Internal Model Authorisation

On 16 July 2024, the EBA launched a consultation (here) on draft ITS specifying the joint decision process with regard to the application for prudential permissions pursuant to the CRR.

The EBA’s consultation runs until 16 October 2024.

ECB consults on Draft Guidance on Governance and Risk Culture

On 24 July 2024, the ECB launched a consultation on a draft guide (here) on governance and risk culture.

According to the ECB, the guide reflects the ECB’s focus on diverse and effective management bodies, and sets out supervisory expectations regarding the governance and risk culture of supervised banks. The guide is intended to replace the 2016 SSM supervisory statement (here) on governance and risk appetite.

The consultation runs until 16 October 2024.

EBA extends Guidelines on Complaints Handling to Credit Servicers

On 24 July 2024, the EBA published final guidelines (here) that extend existing guidelines on complaints handling (here) to credit servicers under the EU Credit Servicing Directive.

The guidelines will apply three months after the entry into force of the proposed Payment Services Regulation (the “PSR”), which will amend the EBA Regulation to include the NCAs designated under the Credit Servicing Directive. The PSR is expected to enter into force in 2025.

From the entry into application of the guidelines, when handling complaints from borrowers, EU credit servicers will be required to apply the same effective and transparent procedures that apply to firms in the banking, insurance and securities sectors.

EIOPA Opinion on the Supervision of Captive Undertakings

On 2 July 2024, EIOPA published an Opinion (here) regarding the supervision of captive (re)insurance undertakings, with a particular focus on intra-group transactions, the prudent person principle, and governance. EIOPA’s Opinion is addressed towards competent authorities, and it outlines supervisory expectations, whilst accounting for the specificities of captive (re)insurers’ business models.

Amendment of EIOPA Decision to facilitate Cross-Border Supervisory Cooperation

On 1 July 2024, EIOPA published an Annex (here) supplementing its Decision of 10 July 2021 (here) on the collaboration of EU supervisory authorities. The Annex is designed to facilitate cross-border cooperation between national supervisors when an insurance or reinsurance undertaking transfers its office within the EU single market (i.e. a cross-border conversion under the EU Mobility Directive).

Technical Standards under Solvency II on the Mapping of ECAIs’ Credit Assessments

On 2 July 2024, Implementing Regulation (EU) 2024/1820 (here) was published in the Official Journal of the EU. The Implementing Regulation contains ITS supplementing the Solvency II Directive as regards the allocation of credit assessments of ECAIs to an objective scale of credit quality steps.

The Implementing Regulation entered into force on 22 July 2024.

Final IAIS Consultation on Climate Risk Supervisory Guidance

On 15 July 2024, the International Association of Insurance Supervisors (the “IAIS”) published its fourth and final consultation on climate-related supervisory guidance in relation to the supervision of the insurance sector.

The consultation relates to the following documentation:

• draft application paper on public disclosure and supervisory reporting of climate risk (here); and
• draft supporting material on macroprudential and group supervisory issues and climate risk (here).

The consultation period runs until 30 September 2024.

ESMA Consultation Package relating to MiFIR Review

On 10 July 2024, the European Securities and Markets Authority (“ESMA”) published a consultation paper (here) containing draft regulatory technical standards (“RTS”) that have been developed in accordance with ESMA’s mandate under Regulation (EU) 2024/791 amending the Markets in Financial Instruments Regulation (“MiFIR”) (amending Regulation known as the “MiFIR Review”).

The consultation seeks to gather stakeholder feedback on the proposals for:

1. the amendment of the level 2 provisions specifying the requirements on equity transparency, covering technical advice to the European Commission, and amendments to the RTS on equity transparency;
2. new ITS for the notification of investment firms acting as systematic internalisers (“SIs”) to competent authorities;
3. amending the RTS specifying the volume cap;
4. amending the RTS specifying organisational requirements for trading venues;
5. new RTS on input/output data for the equity consolidated tape provider (“CTP”); and
6. a proposal on flags for post-trade transparency for the transparency requirements for non-equity instruments, notably bonds.

ESMA’s consultation runs until 15 September 2024 and 15 October 2024 (depending on the various proposals detailed in the consultation paper). After this period, ESMA intends to publish final reports in December 2024 and March 2025, respectively.

ESMA consults on Technical Standards on Order Execution Policies

On 16 July 2024, ESMA launched a consultation (here) on draft RTS that have been developed in accordance with ESMA’s mandate under Directive (EU) 2024/790 amending the Markets in Financial Instruments Directive (“MiFID II”) (amending Directive known as the “MiFID II Review”). The draft RTS supplement the MiFID framework as regards the criteria for establishing and assessing the effectiveness of investment firms’ order execution policies.

ESMA’s consultation runs until 16 October 2024. ESMA will consider feedback received during the consultation, and submit finalised draft technical standards to the European Commission, for endorsement, by 29 December 2024.

ESMA Statement on Regime for “Designated Publishing Entities” pursuant to MiFIR Review

On 22 July 2024, ESMA issued a public statement (here) on the transition to the new regime for the publication of OTC-transactions for post-trade transparency purposes, as introduced by the MiFIR Review.

The MiFIR review introduced provisions empowering NCAs to grant the status of “designated publishing entity” (“DPE”) to investment firms. Under Article 21a MiFIR, DPEs, when they are party to a transaction, shall be responsible for making the transaction public through an approved publication arrangement (“APA”).

The MiFIR review requires ESMA to establish, by 29 September 2024, a public register of all DPEs, specifying their identity and the classes of financial instruments for which they act as DPEs. Considering the need to ensure an orderly transition to the DPE regime, ESMA and NCAs have agreed a two-stage approach: first, ESMA will start publishing the DPE register on 29 September 2024; and secondly, the new DPE regime for post-trade transparency becomes fully operational on 3 February 2025.

Therefore, ESMA expects that, from 3 February 2025, registered DPEs, party to a transaction, will make the transaction public through an APA. At the same time, ESMA expects that the current approach of relying on SIs to make transactions public through an APA should stop applying from 3 February 2025.

ESMA encourages investment firms intending to become DPEs to register with their NCA, indicating the classes of financial instruments for which they wish to take up the function.

European Commission adopts RTS under ELTIF 2.0

On 19 July 2024, the European Commission adopted a Delegated Regulation (here) supplementing the revised Regulation on European long-term investment funds (“ELTIF 2.0”) as regards RTS specifying:

• the criteria for establishing the circumstances in which the use of financial derivative instruments solely serves the purpose of hedging the risks inherent to other investments of the ELTIF;
• the circumstances in which the life of an ELTIF is considered compatible with the life cycles of each of the individual assets, as well as different features of the redemption policy of the ELTIF;
• the circumstances for the use of the matching mechanism (i.e. the possibility of full or partial matching (before the end of the life of the ELTIF) of transfer requests of units or shares of the ELTIF by exiting ELTIF investors with transfer requests by potential investors);
• the criteria to be used for certain elements of the itemised schedule for the orderly disposal of the ELTIF assets; and
• certain elements of the costs disclosure.

Feedback Statement to CBI Consultation on Macroprudential Policy for the Funds Sector

On 23 July 2024, the CBI published a feedback statement (here) to the earlier consultation on the CBI’s discussion paper (here) on an approach to macroprudential policy for investment funds. The discussion paper presented an overview of key considerations for developing and operationalising a macroprudential framework for the funds sector, given its importance for the functioning of the financial system and real economy. The paper was designed to engage stakeholders, domestically and internationally, in order to further advance policy discussion in the area.

The feedback statement outlines that the CBI’s domestic focus is on evaluating the implementation of macroprudential measures already introduced, for Irish authorised property funds and Irish authorised GBP-denominated LDI funds. The CBI continues to actively monitor the funds sector for evolving vulnerabilities, and to deepen its understanding of the nature and magnitude of systemic risk across different fund cohorts.

Draft Technical Standards and Guidelines on LMTs under AIFMD II and the UCITS Directive

On 8 July 2024, ESMA launched consultations on: (i) draft RTS on liquidity management tools (“LMTs”) under the revised Alternative Investment Fund Managers Directive (“AIFMD II”) and the UCITS Directive (consultation paper here); and (ii) draft guidelines on LMTs of UCITS and open-ended alternative investment funds (“AIFs”) (consultation paper here).

Both consultations run until 8 October 2024.

Council of the EU renews Sanctions against Russia

On 22 July 2024, the Council of the EU renewed, for at least a further six months, EU restrictive measures against Russia, in view of Russia’s continuing destabilising actions in Ukraine, until 31 January 2025.

According to the Council of the EU press release (here), as long as the illegal actions by Russia continue to violate the prohibition on the use of force, which is a serious breach of obligations under international law, it is appropriate to maintain in force all the measures imposed by the EU and to take additional measures, if necessary.

ESMA Statement on the Use of Collateral by NFCs acting as Clearing Members

On 10 June 2024, ESMA issued a public statement (here) confirming that, in view of the challenges stakeholders would face if required to comply with central counterparty (“CCP”) collateral requirements, between the expiry of the emergency measures under Delegated Regulation (EU) 153/2013 and the entry into force of EMIR 3, ESMA would not expect NCAs to prioritise supervisory actions that relate to the eligibility of uncollateralised public guarantees, public bank guarantees and commercial bank guarantees for non-financial counterparties (“NFCs”) acting as clearing members, pending the entry into application of EMIR 3.

It is expected that EMIR 3 (comprising an amending Regulation and an amending Directive) could be adopted and published in the Official Journal of the EU before the end of 2024. It would enter into force on the twentieth day following its publication. Most provisions are expressed to apply from entry into force, save for certain provisions amending the clearing thresholds, which are expressed to apply from entry into force of related technical standards.

For an overview of EMIR 3 implementation, see our briefing here.

Joint Trade Association Letter on Initial Margin Model Validation under EMIR 3

On 8 July 2024, a number of trade associations – comprising the International Swaps and Derivatives Association (“ISDA”), the Alternative Asset Management Association (“AIMA”), the European Fund and Asset Management Association (“EFAMA”), and the Asset Management Group of the Securities Industry and Financial Markets Association (“SIFMA”) – published a joint letter (here) that they have submitted to the ESAs and the European Commission on initial margin model approval requirements contained in EMIR 3. The letter highlights challenges posed by the three-month period granted to the EBA and NCAs, under EMIR 3, to validate changes to an initial margin model.

European Commission issues Provisional Request for Advice on Pro Forma Margin Models under EMIR 3

On 31 July 2024, the European Commission published a provisional request (here), to the EBA, for technical advice on a possible delegated act specifying the method for determining the amount of fees, and the modalities of payment of those fees, to be paid by FCs/NFCs requiring the validation of pro forma models under EMIR (as proposed to be revised by EMIR 3).

Since EMIR 3 has not yet entered into force, the European Commission’s request for technical advice has been delivered on the basis of a provisional mandate, subject to the entry into force of EMIR 3. The EBA is requested to deliver its technical advice on a possible delegated act by Q2 2025. The entry into force of EMIR 3 is anticipated to occur before the end of 2024.

Results of Fifth ESMA CCP Stress Test

On 9 July 2024, ESMA published the results (available here) of its fifth stress testing exercise for CCPs. A total of 16 CCPs were included in the exercise. ESMA’s stress test confirmed the overall resilience of EU CCPs, as well as third-country Tier 2 CCPs, to core credit and liquidity financial risks under test scenarios. This year’s exercise included, for the first time, an exploratory analysis of climate risk. The results found that the majority of CCPs tested have started to integrate climate risk into their stress testing frameworks.

In line with ESMA’s mandate under EMIR, where the assessments exposed shortcomings in the resilience of one or more CCPs, ESMA will in due course issue recommendations.

Guidelines on the Functioning of Resolution Colleges

On 5 July 2024, ESMA issued final revised guidelines (here) on written arrangements and procedures for the functioning of resolution colleges, in accordance with the regime under the Central Counterparty Recovery and Resolution Regulation (“CCPRRR”). The guidelines will apply following their publication on ESMA’s website in all official EU languages.

ESMA consults on Draft Technical Standards under CSDR Refit

On 9 July 2024, ESMA launched consultations on aspects of the revised Central Securities Depositories Regulation (“CSDR Refit”). The proposed rules relate to:

• the review and evaluation process of EU central securities depositories (“CSDs”), suggesting a harmonisation of the information to be shared by CSDs on their cross-border activities and the risks to be considered by the relevant authorities for the purpose of feeding the overall assessment of the competent authorities (consultation paper here);
• third-country CSDs, where ESMA is proposing to streamline the information to be notified, aiming for an accurate understanding of the provision of notary, central maintenance and settlement services in the EU, limiting the reporting burden (consultation paper here); and
• the scope of settlement discipline, covering ESMA’s proposals on the underlying cause of settlement fails that are considered as not attributable to the participants in the transaction, and the circumstances in which operations are not considered as trading (consultation paper here).

The consultations run until 9 September 2024.

Final Draft Technical Standards under MiCA

On 4 July 2024, ESMA published a final report (here) containing final draft technical standards under the Markets in Crypto-Assets Regulation (“MiCA”). The final draft RTS and ITS relate to:

• sustainability indicators for crypto-asset consensus mechanisms;
• business continuity measures for crypto-asset service providers (“CASPs”);
• pre- and post-trade transparency requirements;
• the content and format of order books and record-keeping by (i) all CASPs, and (ii) CASPs operating a trading platform;
• machine readability of white papers and the register of white; and
• public disclosures of inside information.

The draft technical standards will now be submitted to the European Commission; it will decide whether or not to adopt the standard within three months.

EBA Guidelines on the Recast Revised WTR

On 4 July 2024, the EBA published a final report (here) containing guidelines on information requirements in relation to transfers of funds and certain crypto-asset transfers under the recently-revised Wire Transfer Regulation (the "recast revised WTR").

Once in application, the guidelines will apply to payment service providers (“PSPs”), intermediary PSPs (“IPSPs”), CASPs, and intermediary CASPs (“ICASPs”), as well as to competent authorities.

The guidelines outline the steps that in-scope entities should take to detect missing or incomplete information that accompanies a transfer of funds or crypto-assets, and the procedures they should put in place to manage a transfer of funds or a transfer of crypto-assets lacking the information required under the recast revised WTR. Competent authorities shall refer to the guidelines when determining whether entities subject to the recast revised WTR have put in place procedures adequate to comply with the Regulation.

The guidelines apply from 30 December 2024.

Draft Guidelines on the Supervision of Issuers of ARTs and EMTs

On 15 July 2024, the EBA launched a consultation (here) on draft guidelines on templates to assist competent authorities in performing their supervisory functions under MiCA in relation to issuers of asset-referenced tokens (“ARTs”) and e-money tokens (“EMTs”).

The consultation runs until 15 October 2024.

Draft Guidelines on the Classification of Crypto-Assets under MiCA

On 12 July 2024, the ESAs published for consultation draft guidelines (here) under MiCA. The draft guidelines set out:

• templates establishing the content and form of the explanation accompanying the crypto-asset white paper referred to under Article 8(4) of MiCA;
• templates establishing the content and form of the legal opinion on the qualification of ARTs referred to under Article 18(2) of MiCA; and
• a standardised test for the classification of crypto-assets under MiCA.

The consultation on the draft guidelines runs until 12 October 2024.

EBA outlines Supervisory Priorities with regard to Issuers of ARTs and EMTs

On 5 July 2024, the EBA issued a document (here) outlining supervisory expectations as regards issuers of ARTs and EMTs, in the light of new requirements under MiCA. MiCA applies in the main from 30 December 2024; however, its provisions relating to ARTs and EMTs have applied since 30 June 2024. Under MiCA, the EBA has a mandate to promote cooperation and coordination between competent authorities and to foster supervisory convergence, to ensure the effective supervision of issuers of ARTs and EMTs.

Supervisory priorities relate to: (i) internal governance and risk management; (ii) ensuring financial resilience; (iii) technology risk management; and (iv) financial crime risk management. Along with its guidance, the EBA has issued a statement (here) setting out its expectations that issuers of ARTs and EMTs comply with their obligations under MiCA.

ESMA Opinion to support Convergent Application of MiCA

On 31 July 2024, ESMA issued an Opinion (here), directed towards NCAs, and designed to support convergent supervisory practices in relation to MiCA across EU Member States.

MiCA applies generally from 30 December 2024, save for provisions relating to ARTs and EMTs, which have applied since 30 June 2024.

Finalised BCBS Disclosure Framework relating to Banks' Crypto Exposures

On 17 July 2024, the Basel Committee on Banking Supervision (the “BCBS”) published:

• a finalised disclosure framework for banks’ crypto-asset exposures (here); and
• a set of targeted revisions to the crypto-asset prudential standard that was first published in December 2022 (here).

Both the disclosure framework and the targeted amendments to the crypto-asset prudential standard have an implementation date of 1 January 2026.

Technical Standards for Uniform Reporting under SEPA Regulation

On 31 July 2024, the EBA launched a public consultation (here) on draft ITS for uniform reporting templates in relation to the level of charges for credit SEPA transfers and share of rejected transactions under Singe Euro Payments Area (“SEPA”) Regulation.

The EBA’s consultation runs until 31 October 2024, after which the EBA will submit final draft technical standards to the European Commission for endorsement.

Entry into Force of the AI Act

On 12 July 2024, Regulation (EU) 2024/1689 (here) laying down harmonised rules on artificial intelligence (the “AI Act”) was published in the Official Journal of the EU. The AI Act aims to foster the development and uptake of safe and trustworthy AI systems across the EU single market, among both private and public actors. The new rules follow a “risk-based” approach, whereby stricter rules apply in circumstances where there is a higher risk of harm.

The AI Act entered into force on 1 August 2024. Most provisions are expressed to apply two years after entry into force, with exceptions for certain provisions.

For more information on the EU AI Act, see our briefings here and here.

Publication of DORA Policy Products

On 17 July 2024, the ESAs published a batch of policy products under the Digital Operational Resilience Act (“DORA”). The batch consists of final technical standards and guidelines, which aim to enhance the digital operational resilience of the financial sector:

• final draft RTS and final draft ITS on the content, format, templates and timelines for reporting major ICT-related incidents and significant cyber threats (here);
• final draft RTS on the harmonisation of conditions enabling the conduct of the oversight activities (here);
• final draft RTS specifying the criteria for determining the composition of the joint examination team (here);
• final draft RTS on threat-led penetration testing (here);
• final draft guidelines on the estimation of aggregated costs/losses caused by major ICT-related incidents (here); and
• final draft guidelines on oversight cooperation (here).

Additionally, on 26 July 2024, the ESAs published a report (here) containing final draft RTS to specify the elements that a financial entity needs to determine and assess when subcontracting ICT services supporting critical or important functions, as mandated by Article 30(5) of DORA.

The final draft technical standards and guidelines have been submitted to the European Commission for endorsement. It is anticipated that the policy products will enter into application by 17 January 2025, in line with DORA’s general date of application.

Relatedly, the ESAs have announced (here) plans to establish the EU systemic cyber incident coordination framework (“EU-SCICF”), in the context of DORA, that will facilitate an effective financial response to cyber incidents that pose a threat to financial stability, by strengthening  sector coordination among financial authorities and other relevant bodies in the EU, as well as with key actors at an international level.

Selected Consultations, Discussion Papers, Speeches and Reports Published

CBI – A Tapestry of Regulatory Change (remarks by Patricia Dunne, CBI Director of Securities and Markets Supervision) (here)

CBI – Guidance Note on Completing an Application for Authorisation as a Credit Servicing Firm and/or Credit Servicer (here)

CBI – Implementing DORA: Achieving Enhanced Digital Operational Resilience in European Financial Services (remarks by Gerry Cross, CBI Director of Financial Regulation - Policy and Risk (here)

Competition and Consumer Protection Commission (“CCPC”) – Annual Report 2023 (here)

Department of Finance – Annual Report 2023 (here)

EBA – Consultation Paper on Draft RTS on CVA Risk of Securities Financing Transactions under Article 382(6) of CRR (consultation runs until 8 October 2024) (here)

EBA – Consultation Paper on Draft Chapter on Independent Valuers for Resolution (to be included in the EBA Handbook on the Resolution of Financial Institutions) (consultation runs until 19 September 2024) (here)

EBA – Report on the Application of Derogations under Articles 94(3) and 94(5) CRD regarding the Remuneration of Identified Staff (here)

EBA – Report on the Application of Gender-Neutral Remuneration Policies by Institutions and Investment Firms (here)

ECB – Digitalisation: Key Assessment Criteria and Collection of Sound Practices (here)

ESMA – Consultation Paper on Supervisory Expectations for the Management Bodies of Directly Supervised Entities (consultation runs until 18 October 2024) (here)

ESMA – Report on Suspicious Transaction and Order Reports (here)

European Commission – Q&As on Instant Payments Regulation (here)

International Capital Market Association (“ICMA”) – Quarterly Report: Q3 2024 (here)

International Swaps and Derivatives Association (“ISDA”) – ISDA in Review (incorporating link to updated ISDA OTC Derivatives Compliance Calendar): July 2024 (here)

Network for Greening the Financial System (“NGFS”) – Nature-related Financial Risks: A Conceptual Framework to guide Action by Central Banks and Supervisors (here)

NGFS – Nature-related Litigation: Emerging Trends and Lessons Learnt from Climate-related Litigation (here)

You may also be interested in:

McCann FitzGerald LLP regularly publishes briefings on topics relevant to financial services briefings, among others. You may be interested in the following briefings:

• Aircraft Lessor Sanctions Update: No Russia and No Belarus Clauses (here)
• Central Bank of Ireland’s Authorisations Report: Authorisation Activity in 2023 (here)
• Central Bank of Ireland’s Authorisations Report: Key Takeaways for Applicants (here)
• Commercial Court Rules on Increase Provision in Pension Scheme (here)
• Company Law: Changes are Imminent (here)
• Corporate Briefing: An update on the personal liability of company directors (here)
• Global Legal Insights: Corporate Tax 2024 (here)
• EU AI Act Enters into Force: Key Compliance Dates for Stakeholders (here)
• Government proposes urgent changes to the law affecting leases and licences granted to students (here)
• Have Your Say on Upcoming NIS 2 Cybersecurity Obligations (here)
• Impending cybersecurity obligations: Are you subject to NIS 2? (here)
• Irish Foreign Investment Screening Regime: The Screening of Third Country Transaction Act 2023 (here)
• ISDA to Proceed with Development of Industry Notices Hub (here)
• New Chapter for the Advertising Standards Authority in Ireland (here)
• Pillar Two Update: Securitisation Entities (here)
• President has signed new law affecting leases and licences granted to students (here)
• Review of the Central Bank of Ireland's Fitness and Probity Regime: What do the Findings mean for Regulated Firms? (here)
• Ryan v Data Protection Commission (here)
• The Jig is Up: First Judgment on Consumer Rights Act 2022 (here)
• Update on Russian Sanctions: 14th Package of EU Sanctions in force and Sanctions Renewed Until 2025 (here)