Financial Services Regulatory Update – December 2022 Round Up

Digital Operational Resilience

On 27 December 2022, the Digital Operational Resilience Act (“DORA”) and a related Directive were published in the Official Journal of the European Union (the “Official Journal”) (here and here). Both DORA and the related Directive enter into force on 16 January 2023. DORA aims to consolidate and upgrade ICT risk requirements as part of operational risk requirements that have, up to this point, been addressed separately in various Union legal acts.

The focus of DORA is on ‘digital operational resilience’ and DORA is intended to address risk deriving from all types of “ICT Services”. To that end, the definition of ICT services is to be understood in a broad manner, encompassing digital and data services provided through ICT systems to one or more internal or external users on an ongoing basis. DORA will apply from 17 January 2025.

EU Listing Rules

On 7 December 2022, the European Commission (the “Commission”) published a package of proposals to simplify the EU listing rules. The package forms part of the Commission’s commitment in the Capital Markets Union Action plan to simplify listing rules. The package includes proposals for:

• a new Regulation to amend the Prospectus Regulation (Regulation (EU) 2017/1129), the Market Abuse Regulation (Regulation (EU) No 596/2014) and the Markets in Financial Instruments Regulation (Regulation (EU) No 600/2014)  (“MiFIR”) (here);

• a new Directive permitting multiple-vote share structures in companies seeking admission of their shares to trading on an SME growth market (here); and

• a new Directive to amend MiFID II (Directive 2014/65/EU) and repeal the Listing Directive (Directive 2001/34/EC) (here).

Crowdfunding

On 16 December 2022, the European Securities and Markets Authority (“ESMA”) published an updated version of its Q&As relating to the Regulation on European crowdfunding service providers for business (the “Crowdfunding Regulation”) (here). The updates include clarifications that the key investment information sheet (“KIIS”) should be made available to prospective investors as soon as the relevant crowdfunding offer is published by the crowdfunding service provider (“CSP”), clarifications around what responsibility the project owner holds for the translation of the content of the KIIS and confirmation that a CSP may operate using different trading names.

Consumer Credit Directive

On 2 December 2022, the Council of the EU (the “Council”) announced that it had reached provisional political agreement with the European Parliament (the “Parliament”) on the proposed Directive on consumer credits to revise and replace the Consumer Credit Directive (Directive 2008/48/EC) (here). The Council states that the proposals made are intended to keep up with the trend of digitalisation as the new credit rules will apply to certain loans that are currently excluded from the scope of the Consumer Credit Directive.  These loans include:

• loans below €200;

• loans offered through crowd-lending platforms; and

• buy-now-pay-later products.

The provisional agreement is subject to approval by the Council and the Parliament.

RTS - PSD2

On 5 December 2022, Commission Delegated Regulation (EU) 2022/2360 was published in the Official Journal (here). This Delegated Regulation amends the regulatory technical standards (the “RTS”) laid down in Commission Delegated Regulation (EU) 2018/389 as regards the 90-day exemption for account access, the strong customer authentication (“SCA”) and the common and secure open standards of communication (“CSC”) under the Payment Services Directive (“PSD2”).

This Delegated Regulation entered into force on 25 December 2022 and will apply from 25 July 2023.

ITS - Financial Conglomerates

On 19 December 2022, Commission Implementing Regulation (EU) 2022/2454 was published in the Official Journal (here).

This Implementing Regulation sets out implementing technical standards (“ITS”) to harmonise the supervisory reporting of risk concentrations and intra-group transactions in accordance with Articles 7 and 8 of the Financial Conglomerates Directive (“FICOD”).

This Implementing Regulation entered into force on 8 January 2023 and will apply from 31 December 2023.

Central Securities Depositaries

On 20 December 2022, the Council of the EU (the “Council”) published the text of its agreed general approach on the proposed Regulation amending the Central Securities Depositories Regulation (the “CSDR Regulation”) (here). The proposed amendments to the CSDR Regulation are intended to clarify the scope of mandatory buy-in rules and cash penalties set out in Article 7 of the CSDR Regulation.

The Council will now engage in negotiations with the other EU institutions in order to agree a final text.

RTS - Single Electronic Reporting Format

On 30 December 2022, Commission Delegated Regulation (EU) 2022/2553 was published in the Official Journal (here). This Delegated Regulation amends the RTS set out in Delegated Regulation (EU) 2019/815 as regards the 2022 update of the taxonomy for the single electronic reporting format.

SI – CCP Recovery and Resolution

On 5 December 2022, the European Union (Recovery and Resolution of Central Counterparties) Regulations 2022 were signed by the Minister for Finance (here). These Regulations give effect to the Central Counterparty Recovery and Resolution Regulation (Regulation (EU) 2021/23) and will apply to the recovery and resolution of central counterparties within the State.

Taxonomy Regulation – Commission FAQs

On 19 December 2022, the Commission published draft notices containing FAQs relating to the Taxonomy Regulation (Regulation (EU) 2020/852) and the Taxonomy Climate Delegated Act (Delegated Regulation (EU) 2021/2139):

• draft Commission Notice on the interpretation and implementation of certain legal provisions of the EU Taxonomy Climate Delegated Act establishing technical screening criteria for economic activities that contribute substantially to climate change mitigation or climate change adaptation and do no significant harm to other environmental objective (here); and

• draft Commission Notice on the interpretation and implementation of certain legal provisions of the Disclosures Delegated Act under Article 8 of EU Taxonomy Regulation on the reporting of Taxonomy-eligible and Taxonomy-aligned economic activities and assets (second Commission Notice) (here).

Both Notices contain replies to frequently asked questions in respect of disclosures of undertakings regarding Taxonomy-eligibility and alignment of economic activities under the Taxonomy Regulation and relevant delegated acts.

Corrigenda to SFDR RTS

On 27 December 2022, a corrigenda to Commission Regulation (EU) 2022/1288 which lays down the Sustainable Finance Disclosures Regulation (Regulation (EU) 2019/2088) (“SFDR”) RTS was published in the Official Journal (here).  

SI - Sustainability-related Disclosures

On 12 December 2022, the European Union (Sustainability-related Disclosures in the Financial Services Sector) (Amendment) Regulations 2022 were signed by the Minister for Finance (here).

These Regulations amend the European Union (Sustainability-related Disclosures in the Financial Services Sector) Regulations 2021 by deleting paragraph (a) in Regulation 3. Regulation 3 provides that the Central Bank of Ireland (the “CBI”) shall monitor compliance with the requirements of the SFDR. Deleting paragraph (a) removes “a pan-European personal pension product (PEPP) provider” from the list of exceptions to this rule.

Commission Speech - Sustainable Finance

On 5 December 2022, the Parliament published a speech by Ms Mairead McGuinness, European Commissioner for Financial Services, Financial Stability and Capital Markets Union (here). Commissioner McGuinness outlined details of the following sustainable finance initiatives:

• SFDR: Q&As on the SFDR will be published by the Commission in early 2023 to address concerns regarding the application of fundamental concepts in the SFDR, legal and reputational risks and greenwashing;

• ESG ratings: the Commission are considering a proposal to bring transparency to the EU ESG ratings market and introduce rules on the operations of the ESG ratings agencies; and

• Taxonomy Regulation: the Commission plans to unveil new online tools to help stakeholders use the Taxonomy and to better collect feedback from the market on usability.

EBA Workplan - Sustainable Finance

On 13 December 2022, the European Banking Authority (“EBA”) published its roadmap on sustainable finance (here). This roadmap sets out the objectives and timeline for delivering tasks relating to sustainable finance and ESG risks. The roadmap outlines the EBA’s approach to integrating ESG risks considerations in the three pillars of the banking framework: market discipline, supervision and prudential requirements.

SSM Supervisory Priorities

On 12 December 2022, the European Central Bank (“ECB”) published its supervisory priorities for the Single Supervisory Mechanism (“SSM”) for 2023-25 (here). The ECB has identified objectives, vulnerabilities and expected activities for each work priority. The priorities for 2023-25 cover:

• strengthening resilience to immediate macro-financial and geopolitical shocks, focusing on credit risk and funding risk;

• addressing digitalisation challenges and strengthening management bodies' steering capabilities; and

• stepping up efforts in addressing climate change.

Climate Stress Testing

On 19 December 2022, the ECB published a report on good practices for climate stress testing (here). With this report, the ECB aims to give banks good examples and suggestions for improving their climate stress testing capabilities and for aligning their practices with ECB expectations. The ECB emphasises that climate and environmental risks (“C&E risks”) remain key priorities and banks are expected to properly manage their C&E risks by the end of 2024.

ITS - Disclosure of ESG Risks

On 19 December 2022, Commission Implementing Regulation (EU) 2022/2453 was published in the Official Journal (here). This Implementing Regulation amends the ITS specified in Implementing Regulation (EU) 2021/637 which contain uniform disclosure formats for the disclosure of ESG risks. This Implementing Regulation entered into force on 8 January 2023.

ITS - Mapping Tables

On 5 December 2022, Commission Implementing Regulation (EU) 2022/2365 was published in the Official Journal (here). This Implementing Regulation contains amended ITS on the mapping of credit assessments of external credit assessment institutions for securitisation in accordance with the Capital Requirements Regulation (Regulation (EU) No 575/2013).

This Implementing Regulation entered into force on 25 December 2022.

Retail Banking Report

On 14 December 2022, the EBA published its thematic review on the transparency and level of fees and charges for retail banking products (here). The report was designed to gather and analyse information to assess whether further legislative initiatives are needed. The findings included that:

• overall, fees and charges vary greatly across the EU market and across financial institutions;

• despite improvements in consumer protection, market practices for fees and charges are causing detriment to consumers; and

• the variety of fees and charges cause varying levels of detriment to consumers and are difficult to compare (with the exception of payment accounts).

Benchmarking

On 15 December 2022, the Commission adopted an Implementing Regulation amending ITS as regards benchmark portfolios, reporting templates and reporting instructions (here).

The next step is for the Parliament and the Council to consider the draft Implementing Regulation and, if neither object, the Implementing Regulation shall be published in the Official Journal and enter into force 20 days thereafter.

ITS - Non-performing Loans

On 16 December 2022, the EBA published a final report (here) containing draft ITS specifying the templates to be used by credit institutions for the provision of information referred under the Non-Performing Loans Directive (Directive (EU) 2021/2167).

The EBA intends that the draft ITS will provide a common standard for non-performing loans transactions across the EU, to enable cross-country comparison and reduce information asymmetries between buyers and sellers. The templates will be used by credit institutions to provide detailed information on their credit exposures for analysis by credit purchasers.

These draft ITS will be submitted to the Commission for adoption.

RTS - Connected Clients

On 21 December 2022, the EBA published a final report on draft RTS on the identification of a group of connected clients under the Capital Requirements Regulation (Regulation (EU) No 575/2013) (here).  The purpose of the draft RTS is to clarify and operationalise the concept of interconnection, i.e., when a control and/or an economic dependency relationship should lead to the grouping of clients.

The draft RTS will be submitted to the Commission for adoption.

ITS – G-SII Reporting

On 22 December 2022, Commission Implementing Regulation (EU) 2022/1994 was published in the Official Journal (here). This Implementing Regulation amends ITS as regards own funds, asset encumbrance, liquidity and reporting for the purposes of identifying global systemically important institutions (“G-SII”).

This Implementing Regulation entered into force on 11 January 2023 and will apply from 11 July 2023.

RTS/ITS –Authorisations

On 29 December 2022, Delegated Regulation (EU) 2022/2580 and Implementing Regulation (EU) 2022/2581 were published in the Official Journal (here and here). These legal acts contain RTS and ITS, respectively, relating to the provision of information in applications for authorisation of a credit institution. On 3 January 2023, Delegated Regulation (EU) 2022/2579 was published in the Official Journal (here). This Delegated Regulation also lays down RTS in respect of the information to be provided in an application for authorisation.

Transfer of Business

On 1 December 2022, two Orders relating to the transfer of certain business between KBC Bank Ireland Public Limited Company and The Governor and Company of the Bank of Ireland were signed by the Minister for Finance (here and here).

Sustainability Risks

On 5 December 2022, the European Insurance and Occupational Pensions Authority (“EIOPA”) published a discussion paper on assessing the prudential treatment of sustainability risks (here). The deadline for comments is 5 March 2023.

EIOPA plans to assess whether a dedicated prudential treatment of insurers' sustainable assets and activities under Solvency II is warranted. The discussion paper focuses on three areas of analysis:

• assets and transition risk exposures;

• underwriting risk and climate change adaptation; and

• social risks and objectives.

Insurance Recovery and Resolution Directive

On 21 December 2022, the Council published the text of its agreed general approach on the proposed Insurance Recovery and Resolution Directive (“IRRD”) (dated 16 December 2022) (here). The Council emphasised the need for national authorities to have flexibility to reflect different national insurance markets and that a creditor should not be worse off in resolution compared to insolvency.

Natural Catastrophe Dashboard

On 6 December 2022, EIOPA launched its dashboard on the insurance protection gap for natural catastrophes (here). The dashboard presents the drivers of a climate-related insurance protection gap to identify measures that will help in decreasing society’s losses in the event of natural catastrophes in Europe.

Updated Representative Portfolios

On 13 December 2022, EIOPA published the updated representative portfolios that will be used for calculating the volatility adjustments (“VA”) to the relevant risk-free interest rate term structures for Solvency II (here).

EIOPA will begin to use these updated representative portfolios for the calculation of the VA for end of March 2023, which will be published at the beginning of April 2023. The update was published in advance to give (re)insurers time to prepare for the change.

Supervisory Statement on Inflation

On 19 December 2022, EIOPA issued a supervisory statement on inflation (here). The supervisory statement is addressed to the national competent authorities (“NCAs”) and issued on the basis of Articles 44, 45, 76 and 101 of the Solvency II Directive. The supervisory statement discusses the impacts of higher inflation rates across the world on insurance and reinsurance undertakings. EIOPA says that long-tail non-life business is expected to experience the most severe impact.

The supervisory statement outlines EIOPA’s supervisory expectations regarding the impact on undertakings’ technical provisions, the impact on investments and the impact on solvency capital requirement.

Administrative Sanctions

On 8 December 2022, the CBI announced (here) that it had reprimanded and fined a firm €3,640,000 pursuant to its administrative sanctions procedure in respect of breaches under

• the European Communities (Life Assurance) Framework Regulations 1994,

• applicable corporate governance codes (including, the Corporate Governance Code for Credit Institutions and Insurance Undertakings 2010, the Corporate Governance Code for Credit Institutions and Insurance Undertakings 2013 and the Corporate Governance Requirements for Insurance Undertakings 2015) and

• the Solvency II Commission Delegated Regulation (EU) 2015/35. 

Best Execution Reporting

On 14 December 2022, ESMA published a statement intended to provide clarity to market participants on best execution reporting (here).

Article 27(3) of MiFID II requires execution venues to make available to the public reports related to the quality of execution of transactions on their venues (“RTS 27 Reports”). The obligation to produce RTS 27 Reports is currently temporarily suspended, but this suspension will cease on 28 February 2023. The requirement to publish RTS 27 Reports is due to be abolished permanently through an amendment to Article 27(3) of MiFID II, however this amendment will not have taken effect by 28 February 2023.

ESMA confirms that from 1 March 2023 until the forthcoming legislative amendment to Article 27(3) of MiFID II, ESMA expects NCAs not to prioritise supervisory actions towards execution venues relating to the periodic reporting obligation on them to publish the RTS 27 Reports.

MiFID II/MiFIR Q&As

On 16 December 2022, ESMA published an updated version of its Q&As on market structures under MiFID II and MiFIR (here).

ESMA’s latest update adds a new Q&A on multilateral and bilateral systems on pages 63-4. This new Q&A explains that an investment firm, acting as single liquidity provider on a regulated market and/or multilateral trading facility, can operate a systematic internaliser only if the two activities are fully separated.

Proposals to amend MiFID II and MiFIR

On 16 December 2022, the Council agreed its general approach for the proposed Regulation amending MiFIR (here) and proposed Directive amending MiFID II (here).

The Council states that the priorities for this review of MiFIR and MiFID II are to improve transparency and availability of market data, improve the level-playing field between execution venues and ensure that EU market infrastructures can remain competitive at international level.

The next step is for negotiations between the Council and the Parliament to begin with a view to reaching a final agreement on the future legislation.

Guidance on Supervising Cross-border Activities

On 14 December 2022, the European Securities and Markets Authority (“ESMA”) published a MiFID II supervisory briefing outlining guidance on the supervision of cross-border activities of investment firms (here). The briefing summarises the key elements of the rules and also includes indicative questions that supervisors are expected to ask themselves, or a firm, when assessing the approach to the supervision of cross-border activities to retail clients of investment firms.

CBI ‘Dear Chair’ Letter

On 7 December 2022, the CBI issued a ‘Dear Chair’ letter entitled “Follow up on thematic review of fund management companies’ governance, management and effectiveness” (here). This ‘Dear Chair’ letter sets out the results of the CBI’s latest thematic review of the fund management company sector and expectations for the sector going forward.

Our briefing (here) provides further detail on this letter and the CBI’s expectations for fund management companies.

AIFMD and UCITS Q&As

On 21 December 2022, the CBI published updated AIFMD Q&As (here) and UCITS Q&As (here) in respect of PRIIPs filing requirements.

The latest edition of the AIFMD Q&A revises Q&A ID 1126, which considers if alternative investment funds (“AIFs”) in scope of the PRIIPs Regulation (Regulation (EU) No 1286/2014) are required to file a PRIIPs key investor document (“KID”) with the CBI. The Q&A sets out the CBI’s requirement that Retail Investor AIFs which produce PRIIPs KIDs shall file these on an ex post basis. This will include periodic updates to existing KIDs.  The Q&A provides that the first annual reporting of such KIDs will take place in January 2024. The CBI confirms that Qualified Investor AIFs (“QIAIFs”) are not required to file a PRIIPs KID with the CBI.

The latest edition of the UCITS Q&A features three new Q&As (ID 1107, 1108 and 1109) under the heading ‘PRIIPS Regulation’ which clarify requirements for the filing of a PRIIPs KID, or, a UCITS key investor information document (“KIID”), if applicable, with the CBI. The CBI states that further guidance on CBI PRIIPs filing requirements can be found (here).

PRIIPS Q&A

On 21 December 2022, the Joint Committee of the European Supervisory Authorities (the “ESAs”) published an updated version of its Q&As on the KID requirements for PRIIPs (here).

The updated document includes new or revised Q&As reflecting the changes introduced by Delegated Regulation (EU) 2021/2268 that are applicable from 1 January 2023. The revised Q&As cover:

• performance scenarios;

• PRIIPs with a recommended holding period (“RHP”) of less than one year;

• derivatives;

• multi-option products (“MOPs”); and

• methodology for calculation of costs

CBI Consultation Paper

On 1 December 2022, the CBI published CP152 on the own funds requirement for UCITS management companies and AIFMs authorised to perform discretionary portfolio management (here).

The CBI is proposing to introduce bespoke own funds requirements for UCITS Mancos and AIFMs authorised to provide discretionary portfolio management and additional non-core services. Annex I of CP152 sets out the proposed amendments to the Central Bank (Supervision and Enforcement) Act 2013 (Section (48(1)) (Undertakings for Collective Investments in Transferable Securities) Regulations 2019 and Annex II of CP152 sets out the proposed amendment to the CBI AIF Rulebook.

Questions for stakeholders are set out in Annex III and comments are requested by 23 February 2023.

QIAIFs Pre-Submission Process

On 7 December 2022, the CBI updated its webpage on the pre-submission process and requirements for QIAIFs (here) to take account of recent macroprudential provisions which apply to QIAIFs proposing to invest in Irish property assets.

Further detail on these macroprudential measures is contained in our briefing (here).

ELTIF Regulation

On 7 December 2022, the Council published the text of the political agreement with the Parliament on the proposed Regulation containing amendments to the European Long-term Investment Funds Regulation (Regulation (EU) 2015/760) (“ELTIF Regulation”) (here).

The aim of these amendments is to overcome a number of supply-side and demand-side limitations in the existing framework. The Council states that revisions to the framework are intended to clarify the scope of eligible assets and investments, the portfolio composition and diversification requirements, the conditions for borrowing and lending of cash and other fund rules, including sustainability aspects.

The Parliament is scheduled to consider the proposed ELTIF Regulation in its 13 February 2023 plenary session. If the Parliament adopts the text at first reading, the Council has stated that it will adopt the text also.

AIFMD Q&As

On 16 December 2022, ESMA published an updated version of its AIFMD Q&As (here). The update (on pages 46-7) relates to special purpose acquisition companies (“SPACs”) and asks whether managers of SPACs are subject to the AIFMD.

ESMA notes that SPACs are not defined in EU law and that SPAC transactions are complex and there are significant variations between the general structuring of relevant vehicles and transactions. ESMA states it is important to assess on a case-by-case basis:

• whether SPACs meet the definition of an “AIF” as legally defined in Article 4(1)(a) of the AIFMD, and

• whether SPACs qualify as a “holding company” in accordance with Article 4(1)(o) of the AIFMD.

ESMA states that this assessment should consider the specific features and characteristics of the structure of the SPAC, based on substance rather than form. ESMA also highlights that circumstances may occur during the lifecycle of a SPAC which are of relevance in assessing whether a SPAC qualifies as an AIF.

RTS - Cross-border Marketing and Fund Management

On 21 December 2022, ESMA published its final report with draft RTS and ITS on cross-border activities under the UCITS Directive (Directive 2009/65/EC) and AIFMD (here).

The RTS specify the information to be provided by management companies and AIFMs seeking to carry out their activities in host Member States. The ITS contain templates to be used to notify an intention to carry out activities in host Member States and specify the procedure for the communication of information between competent authorities concerning these notifications.

The draft ITS and RTS have been submitted to the Commission for adoption.

Cross-border Distribution of Investment Funds

On 9 December 2022, ESMA published updated hyperlinks and summaries of national rules governing marketing requirements and levies for investment funds (here).

EMIR 3

On 7 December 2022, the Commission adopted the following legislative proposals intended to reform the EU clearing system (also known as “EMIR 3”):

• proposal for a Regulation amending Regulations (EU) No 648/2012, (EU) No 575/2013 and (EU) 2017/1131 as regards measures to mitigate excessive exposures to third-country central counterparties and improve the efficiency of Union clearing markets (here); and

• proposal for a Directive amending Directives 2009/65/EU, 2013/36/EU and (EU) 2019/2034 as regards the treatment of concentration risk towards central counterparties and the counterparty risk on centrally cleared derivative transactions (here).

The targeted amendments contained in EMIR 3 are intended to enhance the attractiveness of EU CCPs, reduce reliance of EU market participants on non-EU CCPs, safeguard EU financial stability and enhance the EU’s open strategic autonomy. Proposals include:

• amending provisions in respect of intragroup transaction exemptions and clearing obligations; and

• requiring financial counterparties and non-financial counterparties that are subject to the clearing obligation to hold active accounts, directly or indirectly, at CCPs established in the EU, to clear at least a certain proportion of the services identified as of substantial systemic importance at EU CCPs and to report on that.

The Commission’s proposal will now progress through the European legislative procedure. The next step in this procedure is for negotiations to begin between the European Parliament and the Council of the European Union.

Trade Reporting

On 20 December 2022, ESMA published a final report with Guidelines for reporting trades in derivatives and obligations for trade repositories (“TRs”) under EMIR (here). These Guidelines will apply from 29 April 2024 to financial and non-financial counterparties, to derivatives as defined in Articles 2(8) and 2(9) of EMIR, to TRs as defined in Article 2(2) of EMIR and to competent authorities. These Guidelines will apply in relation to the derivatives reporting obligation outlined in Article 9 EMIR and the TRs’ obligations under Articles 78 and 81 EMIR.

Review of Prudential Framework

On 12 December 2022, the ESAs published their joint advice to the Commission on the review of the securitisation prudential framework. The advice includes an executive summary (here), a review of the securitisation prudential framework for banks (here) and a review of the securitisation framework in Solvency II applicable to (re)insurers (here).

In respect of the securitisation prudential framework for banks, the ESAs consider that re-calibrating the securitisation capital framework for banks would not be a solution that would ensure the revival of the securitisation market. The ESAs highlight that any changes to the capital framework may have a limited impact because investor demand may remain subdued in the foreseeable future, however the ESAs consider the significant risk transfer (“SRT”) market to be an exception, where the capital framework may have a more important role while investor demand seems less of a constraint. On this basis, the ESAs’ advice includes a targeted recommendation aimed at improving the risk sensitiveness of the framework. The ESAs also recommend technical fixes to the prudential framework aiming at improving consistency and clarity.

In respect of the securitisation framework in Solvency II, the ESAs’ advice supports the objective of reviving the EU securitisation markets on a prudent basis with regards to the insurance sector. However, based on the input received and the analysis performed, the ESAs do not advise changes to the current Solvency II framework with regards to the prudential treatment of securitisation.

Securitisation Regulation

On 9 December 2022, several financial associations (the “Joint Associations”) published a letter sent to the chairpersons of the ESAs entitled “Request for guidance to national competent authorities to use enforcement powers in a proportionate and risk-based manner” (here).

The Joint Associations state that the interpretation of Article 5(1)(e) (relating to due diligence requirements for institutional investors) of the Securitisation Regulation (Regulation (EU) 2017/240) by the Commission is overly onerous and “denies EU institutional investors the ability to make suitable investment decisions and generate attractive yields balanced by the risk mitigation offered by global diversification, for both themselves and their clients.”

The Joint Associations call for enforcement guidance to be drafted by the ESAs and addressed to NCAs. The Joint Associations request that this guidance contain the expectation that NCAs would apply their supervisory powers in their supervision and enforcement of Article 5(1)(e) of the Securitisation Regulation in a proportionate and risk-based manner.

DLT Pilot Regime

On 15 December 2022, ESMA published a draft final report on guidelines on standard forms, formats and templates to apply for permission to operate a distributed ledger technology (“DLT”) market infrastructure (“MI”) under the  Regulation on a pilot regime for market infrastructures based on distributed ledger technology (Regulation (EU) 2022/858) (“DLT Pilot Regime Regulation”) (here). These Guidelines apply from 23 March 2023.

On 16 December 2022, ESMA published its first set of Q&As regarding the implementation of the DLT Pilot Regime Regulation (here). The Q&As aim to promote common supervisory approaches and practices in the application of the DLT pilot regime to regulatory data reporting, trading and settlement. The Q&As relate to transaction reporting, financial instrument reference data and order record keeping.

MiCA Delegated Acts

On 21 December 2022, the Commission published a letter (here) and a provisional request (here) to the EBA for advice on delegated acts under the Regulation on markets in crypto-assets (“MiCA”) concerning certain criteria for classification of asset-referenced tokens and e-money tokens as significant and the fees that are to be charged by the EBA to issuers of significant asset-referenced tokens and e-money tokens.

MiCA is subject to legal revision prior to its formal adoption by the Parliament and the Council and publication in the Official Journal is planned for Spring 2023. The Commission asks the EBA to deliver its technical advice by 30 September 2023.

Management of ML and TF risks

On 6 December 2022, the EBA published a consultation paper on draft guidelines on policies and controls for the effective management of money laundering and terrorist financing risks when providing access to financial services (here). Responses must be submitted by 6 February 2023.

The proposed guidelines outline the policies, procedures and controls that firms should have in place under Article 8(3) of Directive (EU) 2015/849 (“MLD4”). The guidelines cover general requirements, the intensity of monitoring measures, limiting access to products or services, and the complaints mechanisms.

Proposed new AML Regulation and MLD6

On 7 December 2022, the Council announced (here) that it has adopted a position on the following proposed AML legislation:

• Regulation on the prevention of the use of the financial system for the purposes of money laundering or terrorist financing (“AML Regulation”) (here) (Annexes here), and

• Directive on the mechanisms to be put in place by the member states for the prevention of the use of the financial system for the purposes of money laundering or terrorist financing and repealing Directive (EU) 2015/849 (“MLD6”) (here).

The Council states that it has made a number of clarifications to the beneficial ownership provisions to make them more transparent, as well as providing that any natural or legal person that can demonstrate a legitimate interest can access certain information from the beneficial ownership registers.

Additionally, the Council states that it has proposed rules requiring cryptoasset service providers (“CASPs”) to apply customer due diligence (“CDD”) measures when carrying out transactions of €1,000 or more. The Council has also introduced measures to mitigate risks relating to transactions with self-hosted wallets and introduced specific enhanced due diligence measures for cross-border correspondent relationships for CASPs.

ISBAR FAQs

On 13 December 2022, the CBI updated its FAQs on the Ireland Safe Deposit Box, Bank and Payment Accounts Register (“ISBAR”) (here). The FAQs encompass questions on the basics of ISBAR, the general reporting requirements, and file generation and technical questions.

Beneficial Ownership of Trusts

On 28 November 2022, Revenue updated its FAQs on the Central Register of Beneficial Ownership of Trusts (“CRBOT”) (here). The FAQs cover interpretation, the scope of the CRBOT, how to update and access the CRBOT, and the legislation underpinning the CRBOT.

On 6 December 2022, Revenue also updated its troubleshooting and user manual for the CRBOT (here). This guidance is intended to address user issues identified when registering trusts on the CRBOT.

Public access to Beneficial Ownership Register of Certain Financial Vehicles

On 15 December 2022, the CBI updated its guidance on the Beneficial Ownership Register of Certain Finance Vehicles (here). The update in this third version relates to Chapters 3 and 4 regarding access to the Register by members of the public.

The CBI confirms on page 22 that due to the CJEU ruling in the Luxembourg Business Registers case (here), access requests by members of the public will not be processed, pending clarification of the legislative position by the law-making body.

High-risk Third Countries

On 19 December 2022, the Commission adopted a Delegated Regulation (here) that amends the list of high-risk third countries with strategic AML and CFT deficiencies under Article 9(2) of the MLD4. The Delegated Regulation adds the Democratic Republic of the Congo, Gibraltar, Mozambique, Tanzania and the United Arab Emirates and removes Nicaragua, Pakistan and Zimbabwe.

Selected Consultations, Discussion Papers, Speeches and Reports Published

CBI – Insurance Newsletter December 2022 (here)

EBA – Draft Guidelines on overall recovery capacity in recovery planning (here)

EBA - Draft Commission Implementing Regulation and Annex to update the list of diversified indices set out in ITS contained in Implementing Regulation (EU) 945/2014 (here).

EBA – EBA closure report of COVID-19 measures (here)

EBA - Consultation paper on ITS amending Commission Implementing Regulation (EU) 2016/2070 with regard to the benchmarking of internal models (here)

EIOPA – Report on the use of limitations and exemptions from Solvency II reporting during 2021 and Q1 2022 (here)

EIOPA -  Technical information on the relevant risk-free interest rate term structures (here) and on the symmetric adjustment of the equity capital charge for Solvency II both with reference to the end of November 2022 (here)

EIOPA – EIOPA 3rd annual report on administrative sanctions and other measures under the Insurance Distribution Directive (IDD) (2021) (here)

ESMA – Peer review into the NCAs’ handling of relocation to the EU in the context of the UK’s withdrawal from the EU (here)

ESMA - Opinion on amendments to Commission Delegated Regulation (EU) 2017/587 and Commission Delegated Regulation (EU) 2017/583 (here)

ESMA – Newsletter: Spotlight on Markets November 2022 (here)

ESMA – Report on CRA Market Share Calculation (here)

EPC – 2022 Payment Threats and Fraud Trends Report (here)

ESRB – Overview of discussion at December 2022 meeting (here)

ISDA – In review – December 2022 (here)

UK Government – Announcement of a suite of “Edinburgh Reforms” aimed at reforming UK financial services law to make the UK more competitive (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:

Central Bank issues Industry Letter in respect of LDI Funds (here)

National laws on EU sanctions will be better aligned (here)

The Gambling Regulation Bill 2022 Is Unveiled (here)

Commission proposes new civil liability rules for AI systems (here)

Pensions & Retirement Plans 2022 - Irish Chapter (here)

New EDPB Guidance on Personal Data Breach Notifications: Twenty-seven stop shop? (here)

Financial Services Regulatory Update – November 2022 Round Up (here)

European Union (Requirements to Indicate Product Prices (Amendment) Regulations 2022 – Make sure that “The Price is Right”! (here)

COVID-19: Extension of Interim Changes to Company Law (here)