Financial Services Regulatory Update – March 2024 Round Up

CBI consults on proposed revisions to Consumer Protection Code

On 7 March 2024, the Central Bank of Ireland (the "CBI") published a consultation paper (CP158) (here) on proposed revisions to the Consumer Protection Code 2012, as amended.

The proposals include a set of clarified, modernised and targeted protections relating to the delivery of financial services, and proportionate requirements to enhance firm ownership of consumer issues, with a focus on securing customers' interests.

The revised Code, as proposed, will be contained in two new CBI Regulations (set out in draft form in the Annexes to the Consultation Paper). The first Regulation will set out Standards for Business, complemented by Supporting Standards for Business, which will replace the existing General Principles of the Code. The second Regulation will set out General Requirements, which will include new protections and existing requirements set out on cross-sectoral and sector-specific bases.

The CBI’s consultation runs until 7 June 2024. For more information, see our recent briefing here.

CBI Regulatory and Supervisory Priorities 2024-25

The CBI recently published its Regulatory and Supervisory Outlook Report (here) setting out both general and sector-specific priorities for 2024 and beyond. Core priorities are as follows:

(i) Promoting proactive and consumer-centric leadership;
(ii) Ensuring firms are resilient;
(iii) Ensuring firms address deficiencies in operational frameworks;
(iv) Ensuring firms manage change effectively;
(v) Climate change and the transition to a net-zero emission economy; and
(vi) Enhancing regulation and supervision.

In addition to outlining supervisory priorities and its sectoral focus for 2024 and beyond, the CBI’s report features three chapters focusing on consumer protection, artificial intelligence, and financial crime.

Ireland for Finance: 2024 Action Plan

On 8 March 2024, the Minister for Finance Michael McGrath and the Minister of State for Financial Services, Credit Unions, and Insurance Jennifer Carroll MacNeill launched the second Action Plan concerning the updated “Ireland for Finance” strategy (see here).

“Ireland for Finance” seeks to further establish Ireland as the global location of choice for international financial services. The 2024 Action Plan details various key measures to realise this ambition over the course of the year, with both public and private sector participation. Following on from the update to the strategy in October 2022 (see here), the latest action plan is focused on 13 key deliverables over the remainder of the year under five core themes, namely: (i) sustainable finance; (ii) fintech and digital finance; (iii) diversity and talent; (iv) regionalisation and promotion; and (v) operating environment.

The Action Plan also contains a special chapter on sustainable finance, highlighting how the “Ireland for Finance” strategy has helped create the conditions for Ireland to play an important role in the transition to a sustainable future.

CS3D moves closer towards final adoption

On 19 March 2024, the Legal Affairs Committee of the European Parliament (“JURI”) adopted the European Commission’s proposal for a Directive on Corporate Sustainability Due Diligence (the “CS3D”) with 20 votes for, 4 against and no abstentions.

The original proposal for the CS3D, published by the Commission in February 2022 (previously reported in our briefing here), has since been significantly watered down during the legislative process, as reflected in the final compromise text (here), endorsed by the Council of the EU on 15 March 2024.

All eyes are now on the vote before the European Parliament during the last plenary session from 23 to 25 April 2024 before parliamentary elections in June 2024.

For more information, see our recent briefing here.

ESMA consults on technical standards under the Green Bond Regulation

On 26 March 2024, the European Securities and Markets Authority (“ESMA”) launched a consultation (here) on draft regulatory technical standards (“RTS”) related to the registration and supervision of external reviewers under the EU Green Bond Regulation.

ESMA’s proposals relate to the registration and supervision of entities interested in becoming external reviewers of EU green bonds (“EuGB”). The proposals specify the criteria used for assessing an application for registration by an external reviewer. ESMA hopes to standardise registration requirements and contribute to developing a level playing field across the EU through ensuring lower entry costs for applicants.

The EU Green Bond Regulation entered into force on 21 December 2023, and will apply from 21 December 2024.

EFRAG releases second set of technical explanations on the ESRS

On 1 March 2024, the European Financial Reporting Advisory Group (the "EFRAG") released (here) the second set of technical explanations to assist stakeholders in the implementation of the European Sustainability Reporting Standards (the "ESRS"). The first Q&A document from January 2024 is available here. The Q&As respond to stakeholders' technical questions on the ESRS, as part of EFRAG's role as technical advisor to the European Commission.

Council of the EU adopts Directive amending BRRD and SRM Regulation as regards aspects of internal MREL

On 26 March 2024, the Council of the EU adopted a Directive (final text here) that amends the Bank Recovery and Resolution Directive (“BRRD”) and the Single Resolution Mechanism (“SRM”) Regulation to include targeted proportionality requirements in respect of the treatment of internal minimum requirements for own funds and eligible liabilities (“MREL”) in bank resolution groups.

The new rules aim to provide resolution authorities with the power of setting internal MREL on a consolidated basis, subject to certain conditions. Where a resolution authority allows a banking group to apply such consolidated treatment, intermediate subsidiaries will not be obliged to deduct individual holdings of internal MREL. In addition, the new rules introduce a specific MREL treatment for “liquidation entities”. Those are defined as entities within a banking group earmarked for winding-up in accordance with insolvency laws, which would, therefore, not be subject to resolution action.

On this basis and as a rule, liquidation entities will not be obliged to comply with an MREL requirement, unless the resolution authority decides otherwise on a case-by-case basis. The own funds of these liquidation entities issued to the intermediate entities will not need to be deducted except when they represent a material share of the own funds and eligible liabilities of the intermediate entity.

The adopted text awaits publication in the Official Journal of the EU.

MEPs agree resolutions to protect public finances from  costs of bank failure

On 20 March 2024, the European Parliament's Economic and Monetary Affairs Committee (“ECON”) voted in favour of new rules to protect public finances from the cost of bank failure (see press release here).

The reforms widen the scope of the resolution framework for any bank, irrespective of size. Under the reforms, agreed taxpayer-funded financial support could be granted only to remedy a serious disturbance in the economy of an EU Member State of an exceptional or systemic nature, and to preserve financial stability.

The reforms also introduce a modification in the ranking of creditors, which seeks to make the Deposit Guarantee Schemes funded by banks to compensate depositors, as well as the Single Resolution Fund, more accessible for the funding of resolution.

Action Plan for Insurance Reform: Fourth Implementation Report

The Government has published a fourth implementation report (here) pertaining to its Action Plan for Insurance Reform. According to Ministers of State Jennifer Carroll MacNeill and Dara Calleary, the report highlights the Government's ongoing commitment to realising the Programme for Government's vision of a robust economy supported by an accessible insurance system, with significant progress made in 2023, including duty of care reforms (introduced by the Courts and Civil Law (Miscellaneous Provisions) Act 2023) and the strengthening of the Personal Injuries Resolution Board. Through its reforms, the Government hopes to facilitate enhanced affordability and choice for customers, and to ensure that the Irish market is a more attractive one for insurance undertakings to expand and broaden their risk appetites.

EIOPA Supervisory Priorities 2024-26

The European Insurance and Occupational Pensions Authority (“EIOPA”) has outlined its EU-wide strategic supervisory priorities for 2024 and beyond (see here). For 2024, EIOPA will focus on: (i) continued monitoring of the impacts of the macroeconomic environment; (ii) risk transfers (including the capacity and appropriateness of risk transfers); and (iii) value for money (including in relation to inflation and current macroeconomic trends).

Specific areas of focus for 2025 and 2026 will be identified as part of EIOPA’s yearly revision of its priorities, in order to capture the latest developments and trends, with an overarching focus on the impacts of digitalisation, cyber resilience, and climate and ESG-related issues.

European Commission publishes draft interpretative notice on transitional arrangements under MiFIR

On 27 March 2024, the European Commission published a draft interpretative notice (here) to provide clarity to market participants on transitional arrangements, provided for by the Markets in Financial Instruments Regulation (“MiFIR”), in the light of recent MiFIR reforms.

The revised MiFIR rules, politically agreed in June 2023 (see here), apply as of 28 March 2024, with certain elements of the Regulation to be phased in over the coming years. The new rules cover the limitations regarding trading without pre-trade transparency, moving from a double to a single volume cap.

The EU will now prepare Delegated Regulations specifying the new rules, including for the single volume cap. The transitional regime laid down under Article 54(3) of MiFIR provides that existing delegated acts remain applicable until the new ones enter into force.

ESMA has issued a public statement (here) complementing the Commission’s draft notice.

ESMA publishes transparency calculations for equity and equity-like instruments

On 1 March 2024, ESMA published the results (here) of the annual transparency calculations for equity and equity-like instruments. These transparency calculations include the liquidity assessment and determination of the most relevant market in terms of liquidity as per Delegated Regulation (EU) 2017/567 supplementing MiFIR.

Transparency requirements based on the results apply as of 1 April 2024 and until 6 April 2025.

CBI issues Feedback Statement to CP155 and finalises ELTIF Chapter within AIF Rulebook

On 11 March 2024, a significant step forward was taken in relation to domestic integration of the European long term investment fund (“ELTIF”) regime when the CBI, as the culmination of its ELTIF consultation process (CP155), published the new AIF Rulebook (here) containing a new chapter specifically dealing with the requirements applicable to ELTIFs. The CBI has also published a Feedback Statement (here) to CP155, as well as a new application form for ELTIFs applying for authorisation, and updated website guidance (available here).

As a result, the CBI is now accepting applications for ELTIFs.

Publication of RTS and ITS under AIFMD and the UCITS Directive

On 25 March 2024, the following Delegated and Implementing Regulations supplementing the UCITS Directive and the Alternative Investment Fund Managers Directive (“AIFMD”) were published in the Official Journal of the EU:

• Implementing Regulation (EU) 2024/910 (here) laying down implementing technical standards (“ITS”) for the application of the UCITS Directive with regard to the form and content of the information to be notified in respect of the cross-border activities of UCITS, UCITS management companies, the exchange of information between competent authorities on cross-border notification letters. The ITS will apply from 14 July 2024.
• Delegated Regulation (EU) 2024/911 (here) supplementing the UCITS Directive with regard to RTS specifying the information to be notified in relation to the cross-border activities of management companies and UCITS. The RTS will apply from 25 June 2024.
• Delegated Regulation (EU) 2024/912 (here) supplementing AIFMD with regard to RTS specifying the information to be notified in relation to the cross-border activities of managers of alternative investment funds (“AIFMs”). The RTS will apply from 25 June 2024.
• Implementing Regulation (EU) 2024/913 (here) laying down ITS for the application of AIFMD with regard to the form and content of the information to be notified in respect of the cross-border activities of AIFMs and the exchange of information between competent authorities on cross-border notification letters. The ITS will apply from 14 April 2024.

European Commission to adopt draft RTS under ELTIF 2.0 with amendments

The European Commission has published a Communication (here), dated 6 March 2024, regarding its intention to adopt, with amendments, ESMA’s draft RTS under ELTIF 2.0 specifying obligations concerning hedging derivatives, redemption policy and liquidity management tools, trading and issue of units or shares of an ELTIF, and transparency requirements. An Annex to the Communication (here) outlines the Commission’s reasoning for the proposed amendments.

For more information on the RTS under ELTIF 2.0, see our recent publication (here) by our Investment Management Group.

European Parliament adopts Directive on sanctions violations

On 12 March 2024, the European Parliament adopted (see here) a Directive on the definition of criminal offences and penalties for the violation of EU restrictive measures and amending Directive (EU) 2018/1673, as proposed by the European Commission.

The proposed Directive provides for consistent definitions in respect of sanctions violations, including the failure to freeze funds, failure to observe travel bans or arms embargoes, transferring funds to persons subject to restrictive measures, or doing business with state-owned entities of sanctioned countries. Providing financial services or legal advisory services in violation of sanctions will also become a punishable offence. The proposed Directive will also ensure that the circumvention of sanctions is a punishable offence. Examples include concealing or transferring funds that should be frozen, hiding the true ownership of property, and not reporting necessary information.

Violation and circumvention of sanctions will be criminal offences carrying prison sentences of a maximum of five years in all EU Member States. Companies that violate or circumvent sanctions will be subject to dissuasive fines and Member States have the choice to impose a maximum penalty based on the worldwide annual turnover of the company or based on absolute maximum amounts in their transposition measures. The proposed Directive provides a specific carve-out for humanitarian assistance or supporting basic human needs, which should not count as sanctions violations.

The proposed Directive awaits formal approval by the Council of the EU. It will enter into force 20 days after publication in the Official Journal of the EU, after which Member States will have one year to transpose it into national legislation.

European Commission publishes guidance on the "No re-export to Russia" clause

On 22 February 2024, the European Commission published an FAQ document (here) on sanctions against Russia and Belarus, with a focus on Article 12g of Regulation (EU) 833/2014, as amended by Regulation (EU) 2023/2878. The guidance addresses the timeline for the application of Article 12g, and provides a template “No re-export to Russia” clause that can be considered as meeting the obligation under Article 12g.

Article 12g was introduced by the 12th package of sanctions against Russia, published on 18 December 2023 (see here). Article 12g aims to combat the circumvention of EU export bans and specifically where goods exported to third countries are re-exported to Russia. 

The obligation to include the “No re-export to Russia” clause depends on the contract's date of conclusion. For contracts concluded before 19 December 2023, the requirement to include the contractual prohibition does not apply until 20 December 2024, or until the contract's expiry, whichever is earliest. For contracts concluded as of 19 December 2023, such contracts must contain a “no re-export to Russia” clause as of 20 March 2024.

ESMA issues statement on deprioritising supervisory actions linked to the clearing obligation for third-country pension scheme arrangements

On 27 March 2024, ESMA issued a public statement (here) on deprioritising supervisory actions linked to the clearing obligation for third-country pension scheme arrangements, pending the finalisation of the review of the European Market Infrastructure Regulation (“EMIR”).

The EMIR 3 text, on which political agreement has been reached (see here and here), incorporates an exemption from the EMIR clearing obligation when transacting with a third-country pension scheme arrangement that is exempt from the clearing obligation under that third country’s national law. ESMA has now confirmed that it expects EMIR national competent authorities not to prioritise supervisory actions in relation to the clearing obligation for such transactions and has recommended that they apply their risk-based supervisory powers in their day-to-day enforcement of applicable legislation in this area in a proportionate manner. This will provide significant comfort to stakeholders concerned at the incurring the operational and execution challenges of clearing pending entry into force of the anticipated EMIR 3 exemption.

Agreement on Cyber Solidarity Act and on Revisions to Cybersecurity Act

On 6 March 2024, the Council of the EU and the European Parliament reached a provisional political agreement (see here) on the proposal for a Regulation laying down measures to strengthen solidarity and capacities in the EU to detect, prepare for, and respond to, cybersecurity threats and incidents (agreed text here), also known as the "Cyber Solidarity Act", as well as on proposed targeted amendments to Regulation (EU) 2019/881 (the “Cybersecurity Act”) (agreed text here).

The main points of the proposed Cyber Solidarity Act are as follows:

• supporting detection and awareness of significant or large-scale cybersecurity threats and incidents by establishing a cybersecurity alert system, a pan-European infrastructure composed of national and cross-border cyber hubs responsible for information-sharing, detection, and responses to cyber threats;
• creating a cybersecurity emergency mechanism to support preparedness of highly-critical sectors, a new private sector incident response services reserve that will intervene at the request of Members States or EU institutions, and mutual financial assistance; and
• establishing an evaluation and review mechanism to assess the effectiveness of actions under the cybersecurity emergency mechanism, the use of the cyber security reserve, and the effectiveness of the proposed Regulation itself.

The main points of the proposed amendments to the Cybersecurity Act are as follows:

• adopting European certification schemes for “managed security services”, defined as cybersecurity incident-related services that can consist of, for example, incident handling, penetration testing, security audits, and consulting related to technical support;
• clarifying the definition of “managed security services” and ensuring alignment with the NIS2 Directive;
• aligning the security objectives of the certification schemes with security objectives of other schemes under the Cybersecurity Act in its current form;
• modifying the list of requirements to be met by conformity assessment bodies; and
• providing for the possibility of quarterly briefings by the EU Agency for Cybersecurity or by the Commission to the co-legislators on the functioning of the certification schemes.

Following the provisional political agreement, both legislative texts await formal endorsement by the Council of the EU and the European Parliament.

Guidelines for Designated Persons under supervision of AMLCU

On 28 March 2024, the Anti-Money Laundering Compliance Unit (“AMLCU”) of the Department of Justice published (here) anti-money laundering and countering the financing of terrorism (“AML/CFT”) guidelines for designated persons supervised by the AMLCU.

The purpose of the guidelines is to assist designated persons supervised by the AMLCU in understanding and meeting AML/CFT obligations under the Criminal Justice (Money Laundering and Terrorist Financing) Act 2010, as amended, and under related statutory instruments.

Reforms streamlining reporting obligations for supervisory authorities

On 12 March 2024, MEPs voted in favour of new rules streamlining reporting obligations for the European Supervisory Authorities (the EBA, the EIOPA and ESMA – the “ESAs”), the Single Resolution Board, and the European Anti-Money Laundering Authority (the “AMLA”) (once it is in operation), in order to remove certain requirements deemed to be administrative burdens (see press release here).

The reforms require in-scope authorities to follow a "report once" policy to protect reporting entities' data, and to adopt an integrated reporting system, to ensure consistency and clarity across the sector.

CBI Response to Consultation on National Payments Strategy

On 4 March 2024, the CBI issued a response (here) to the Department of Finance’s consultation on the development of the National Payments Strategy (the "NPS").

According to CBI, priorities for the NPS should be, among others: (i) to safeguard cash as a means of payment; (ii) to maintain security and resilience in payments; and (iii) to enhance research and analytical insights.

ESMA launches Consultation Package on MiCA

On 25 March 2024, ESMA published (here) its third consultation package in respect of the Markets in Crypto-Assets Regulation (“MiCA”). ESMA seeks input on four sets of proposed rules and guidelines:
(i) draft RTS on detection and reporting of suspected market abuse in crypto-assets;
(ii) draft guidelines on policies and procedures, including the rights of clients, for crypto-asset transfer services;
(iii) draft guidelines on suitability requirements for certain crypto-asset services and format of the periodic statement for portfolio management; and
(iv) draft guidelines on ICT operational resilience for certain entities under MiCA.

ESMA’s consultation runs until 25 June 2024. ESMA will consider feedback received and publish a final report. By 30 December 2024, at the latest, ESMA will submit finalised draft technical standards to the European Commission for endorsement.

ESMA publishes Final Report containing Technical Standards under MiCA

On 25 March 2024, ESMA published a final report (here) containing draft RTS and draft ITS under MiCA. The draft standards, set out in the Annexes to the report, relate to the following:

• notification by certain financial entities of their intention to provide crypto-asset services;
• authorisation of crypto-asset service providers (“CASPs”);
• complaints-handling by CASPs; and
• intended acquisitions of qualifying holdings in CASPs.

EBA consults on Guidelines on Redemption Plans under MiCA

On 8 March 2024, the European Banking Authority ("EBA") launched a consultation (here) on draft guidelines for the plans to orderly redeem asset-referenced tokens (“ARTs”) or e-money tokens (“EMTs”) in the event that the issuer fails to fulfil its obligations under MiCA. MiCA entered into force on 29 June 2023 and establishes a regime for the regulation and supervision of crypto-asset issuance and crypto-asset service provision in the EU (see our briefing here).

Provisions under MiCA relating to ARTs and EMTs apply from 30 June 2024.

The draft guidelines apply to issuers of ARTs and EMTs, as defined by Article 3(1) of MiCA, and seek to:

• clarify the main principles governing redemption plans, such as the equitable treatment of token holders, and describe the main steps for the orderly and timely implementation of the plan, including the communication plan, the content of the redemption claims and the distribution plan;
• cover the case of pooled issuance, where the same token is issued by multiple issuers; and
• outline the triggers for the activation of redemption plans by the competent authorities and the co-operation with the prudential and resolution authorities.

ESMA’s consultation runs until 10 June 2024.

RTS under Securitisation Regulation

On 22 March 2024, Delegated Regulation (EU) 2024/920 (here) was published in the Official Journal of the EU. The Delegated Regulation contains RTS supplementing the Securitisation Regulation as regards the specification of the minimum performance-related triggers for simple, transparent and standardised (“STS”) on-balance-sheet securitisation transactions.

The Delegated Regulation enters into force on the twentieth day following that of its publication.

European Commission adopts RTS relating to Principal Adverse Impacts on Sustainability Factors for STS Securitisations

On 5 March 2024, the European Commission adopted a Delegated Regulation (here) providing RTS specifying, for STS non-asset-backed commercial paper ("non-ABCP") traditional securitisation, and for STS on-balance-sheet securitisation, the content, methodologies and presentation of information related to the principal adverse impacts of the assets financed by the underlying exposures on sustainability factors.

The Delegated Regulation lays down the standards relating to content, methodologies, and presentation of information on principal adverse impacts on sustainability factors of the assets financed by residential loans, auto loans or leases for non-ABCP traditional securitisations and on-balance-sheet STS securitisations. The draft Delegated Regulation seeks to ensure consistency with the ESAs' work in respect of sustainability-related disclosures in financial services under the Sustainable Finance Disclosure Regulation ("SFDR"), which sets out sustainability-related disclosure requirements.

The RTS apply to STS securitisations where the underlying exposures are residential loans, auto loans or leases and distinguishes between mandatory indicators and additional indicators.

New Rules for Critical and Significant Benchmarks

On 4 March 2024, ECON voted in favour of new rules for critical and significant benchmarks, EU Climate Transition Benchmarks, EU Paris-Aligned Benchmarks, and certain commodity benchmarks, to prevent greenwashing and assure adequate supervision (see press release here). ECON has agreed that ESMA should have a supervisory role in respect of critical, significant, cross-border, third country, as well as EU Climate Transition and EU Paris-aligned benchmarks.

Selected Consultations, Discussion Papers, Speeches and Reports Published

Basel Committee on Banking Supervision (“BCBS”) – Consultation on Global Systemically Important Banks: Revised Assessment Framework (here) (consultation runs until 7 June 2024)

CBI – Fitness and Probity Review: Terms of Reference (here)

Competition and Consumer Protection Commission (“CCPC”) – Consumer Protection List (here)

EBA – Consultation on Draft RTS on the Allocation of Off-Balance Sheet Items and UCC Considerations under Article 111(8) Capital Requirements Regulation (here) (consultation runs until 4 June 2024)

EBA – Guidelines on the Establishment and Maintenance of National Lists or Registers of Credit Servicers under the EU Credit Servicing Directive (here)

ESMA – Report on 2023 Corporate Reporting Enforcement and Regulatory Activities (here)

Financial Services Information Sharing and Analysis Centre (“FS-ISAC”) – Digital Operational Resilience Act: Implementation Guidance (here)

Financial Services Pensions Ombudsman (“FSPO”) – Overview of Complaints 2023 (here)

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

ISDA – ISDA Quarterly: March 2024 (here)

Irish Funds – Why Ireland 2024 (here)

Loan Market Association (“LMA”) – Guide to the Application of the Sustainability Linked Loan Principles in Fund Finance (here)

LMA – Horizons: Issue 1 (new sustainable finance publication) (here)

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CS3D: Close to the finish line but at what cost? (here)

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EU Green Claims Directive: the end of unsubstantiated greenwashing claims on products? (here)

Global Legal Insights - Banking Regulation 2024 (here)

Potential personal exposure of company directors for wilfully disobeying a court order (here)

Restrictive Covenants in Commercial Leases – A Stitch in Time (here)

Rights to request remote and flexible working for caring purposes now in operation (here)

VAT Treatment of Construction Services (here)

Virtual Asset Regulation In Ireland (here)