Financial Services Regulatory Update – September 2023 Round Up
| General Updates | |
|---|---|
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Government Legislation Programme: Autumn 2023 |
On 26 September 2023, the Government published its Legislation Programme (here) for the Autumn 2023 Dáil session. Bills referenced in the Programme relevant from a financial services regulatory perspective include, among others:
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Department of Finance’s Consumer Protection Roadmap |
On 13 September 2023, the Department of Finance published its Financial Consumer Protection Roadmap (here). The purpose of the roadmap is to collate information on the key consumer protection policies that are being developed, both at a national and EU level, helping stakeholders to navigate the changing financial services landscape. |
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New Powers for the CCPC |
On 15 September 2023, a commencement order (here) for the Competition (Amendment Act) 2022 was published, empowering the Competition and Consumer Protection Commission (the “CCPC”) with a range of new merger control and enforcement powers. The new powers for the CCPC came into effect on 27 September 2023. Powers include:
For more information, please see our recently-published briefing (here). |
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Commencement of Certain Provisions of the Finance Act 2022 |
On 5 September 2023, the Minister for Finance Michael McGrath signed a commencement order (here) to commence certain provisions under section 40(1) of the Finance Act 2022, which provide for an increase of the effective tax rate for the Knowledge Development Box (“KDB”). The increase took effect on 1 October 2023. The KDB is an OECD-compliant intellectual property regime, which provides relief from corporation tax on income arising from qualifying assets such as computer programs, inventions protected by a qualifying patent, or certified inventions for SMEs. The development is another step in the implementation of Pillar Two of the OECD Agreement on the Two Pillar Solution to Address the Tax Challenges Arising from the Digitalisation of the Economy, as part of Ireland’s continuing commitment to agreed international tax reforms. |
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ESAs publish Risk Outlook Report for August 2023 |
On 18 September 2023, the three European Supervisory Authorities (“ESAs”) – those being the European Banking Authority (“EBA”), the European Insurance and Occupational Pensions Authority (“EIOPA”) and the European Securities and Markets Authority (“ESMA”) – issued a Joint Committee report (here), dated August 2023, on risks and vulnerabilities in the EU financial system. The report draws attention to continued economic uncertainty. The ESAs warn national supervisors of the financial stability risks stemming from the heightened uncertainty, and call for vigilance from financial market participants. |
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New Requirements for Crowdfunding Service Providers |
On 29 September 2023, the European Commission adopted Delegated Regulation (here) containing regulatory technical standards (“RTS”) specifying requirements for crowdfunding service providers with regard to credit scoring of crowdfunding projects, pricing of crowdfunding offers, and risk management policies and procedures. The Delegated Regulation will enter into force following its prospective publication in the Official Journal. |
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CCPC Research Highlighting Risks of Pension Inadequacy |
New research (here) by the CCPC reveals some “concerning” gaps in retirement planning. 1 in 10 persons aged 45-64 do not currently have any form of retirement planning. Furthermore, 1 in 4 of those without a pension say they cannot afford to start one. According to the CCPC, risks associated with pension inadequacy are augmented by increases in the cost of living and decreased levels of home ownership. As an additional matter, 69% of those surveyed say they would be happy to pay into a compulsory pension scheme. |
| ESG/Sustainability | |
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Political Agreement on Proposed Directive preparing Consumers for Green Transition |
On 19 September 2023, the Council of the EU and the European Parliament reached a provisional political agreement on the proposal for a Directive (here) amending the Unfair Commercial Practices Directive (“UCPD”) (2005/29/EC) and the Consumer Rights Directive (“CRD”) (2011/83/EU) as regards measures to empower consumers for the green transition by providing better protection against unfair market practices and improved access to information. The political agreement maintains the key objectives of the initial proposal but introduces refinements, such as the inclusion of unfair claims based on greenhouse emissions offsetting in the list of banned practices, stronger measures against early obsolescence, clarification of traders’ liability in certain cases, and the introduction of a harmonised format to increase the visibility of the voluntary commercial guarantee of durability, as well as improvements in the reminder on the legal guarantee of conformity. |
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European Commission Consultations on the SFDR |
On 14 September 2023, the European Commission launched a public consultation (here), as well as a targeted consultation (here), seeking detailed feedback on the implementation of the Sustainable Finance Disclosure Regulation (“SFDR”) (2019/2088). The SFDR, which has been in application since March 2021, sets out how financial intermediaries must communicate sustainability information to investors. It is designed to bring more transparency to the market and enable investors to make informed choices. Both consultations will run until 15 December 2023. |
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ECB’s Climate Stress Test |
On 6 September 2023, the European Central Bank (“ECB”) published the results (here) of its second economy-wide climate stress test. The results of the exercise reveal, according to the ECB, that an accelerated green transition would provide significant benefits for firms, households, and to the financial system as a whole, compared with late-push or delayed transition scenarios. While an accelerated transition would, according to the ECB, lead to greater costs for households and firms in the short term, due to increases in energy prices, it would lower financial risks in the medium term owing to progressively reducing energy expenses, and due to investment in renewable energy capacity. |
| Capital Requirements/Credit Institutions | |
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Adoption of Revised CCD |
On 12 September 2023, the European Parliament announced via press release (here) that it had adopted the proposed revised Consumer Credit Directive (“CCD”) (adopted text here). The Directive aims to make EU credit markets function more smoothly, whilst ensuring a high degree of consumer protection. According to the EU, the revised Directive:
On 9 October 2023, the Council of the EU published a press release (here) announcing its formal adoption of the revised Directive. The newly-adopted Directive will be published in the Official Journal, whereupon it will enter into force on the twentieth day following publication. After entry into force, EU Member States will have two years to adopt necessary laws and administrative provisions, and three years in which to apply them. |
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ECB Regulation on the Application of Minimum Reserve Requirements |
On 1 September 2023, Regulation (EU) 2023/1679 (here) of the ECB, amending Regulation (EU) 2021/378 to reflect the decision of the ECB to set the rate of remuneration of minimum reserves at 0% (here), was published in the Official Journal. The Amending Regulation has now entered in force and is applicable as of 20 September 2023, which was the day on which the current reserve maintenance period began. |
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ECB Items on Reporting by NCAs |
On 1 September 2023, Regulation (EU) 2023/1678 (here) of the ECB, amending Regulation (EU) 2015/534 on the reporting of supervisory financial information, was published in the Official Journal. The Regulation aligns submission to the ECB by national competent authorities (“NCAs”) of supervisory financial information with the requirements of Decision (EU) 2023/1681 (here), which has also been published in the Official Journal. Additionally, Decision (EU) 2023/1680 (here) concerning the reporting, to the ECB, of the funding plans of supervised entities by NCAs was published in the Official Journal. The ECB Regulation entered into force on 21 September 2023. The ECB Decisions take effect on notification to the NCAs of relevant EU Member States. |
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Capital Requirements: RTS on the Identification of Shadow Banking Entities |
On 6 September 2023, the European Commission adopted Delegated Regulation (here), together with its accompanying Annex (here), supplementing the Capital Requirements Regulation (“CRR”) (575/2013) with regard to RTS specifying the criteria for the identification of the “shadow banking entities” to which Article 394(2) of the CRR refers. The RTS aim to ensure the harmonisation and comparability of exposures reported by credit institutions, and to provide supervisors with robust data to assess banks' risks in relation to non-banking financial intermediaries. The Delegated Regulation is to be submitted to the European Parliament and the Council of the EU for a three-month period of scrutiny. |
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Capital Requirements: ITS on Closely Correlated Currencies |
On 11 September 2023, Commission Implementing Regulation (EU) 2023/1718 (here) containing amending implementing technical standards (“ITS”) with regard to closely correlated currencies in accordance with the CRR was published in the Official Journal. The Implementing Regulation entered into force on 1 October 2023 |
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Credit Servicing Directive: ITS published in Official Journal |
On 29 September 2023, Commission Implementing Regulation (EU) 2023/2083 (here) was published in the Official Journal. The Implementing Regulation contains ITS for the application of Article 16(1) of the Credit Servicers’ Directive (2021/2167) with regard to the templates to be used by credit institutions for the provision to buyers of information on their credit exposures in the banking book. The Implementing Regulation is to apply from 19 October 2023. |
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ECON Report on Proposal to Amend the BRRD and the SRM Regulation |
On 11 September 2023, the Committee on Economic and Monetary Affairs (“ECON”) of the European Parliament published a draft report (here) on the proposal (here) for a Directive amending the Bank Recovery and Resolution Directive (“BRRD”) (2014/59/EU) and the Single Resolution Mechanism (“SRM”) Regulation (806/2014) as regards certain aspects of the minimum requirement for own funds and eligible liabilities. |
| Insurance / Insurance Distribution | |
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EIOPA Survey on Access to Cyber Insurance |
On 20 September 2023, EIOPA launched a survey (here) on access to cyber insurance by SMEs, hoping to gain deeper insights into the challenges small businesses face in protecting themselves from cyber risk and to evaluate the level of access to cyber insurance. Comments can be made by SMEs up until 20 March 2024. |
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EIOPA’s Work Programme for 2024 |
On 28 September 2023, EIOPA published a revised single programming document (here) which sets out the activities EIOPA plans to undertake in the period 2024-2026, and which includes EIOPA’s annual work programme for 2024. In 2024, EIOPA will continue to focus on consumer and investor protection, operational resilience, financial conglomerates, securitisation, and on facilitating the required green and digital transformations, among other key areas. |
| Investment Funds | |
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CBI Guidance on Regulatory Reporting |
The CBI has published updated guidance in respect of regulatory reporting requirements for: (i) depositaries (here); (ii) fund administrators (here); and (iii) alternative investment fund managers (“AIFMs”) (here), as well as the following documents relating to special purpose entities (“SPEs”): (i) FVC and SPV registration form (here); and (ii) SPE Registration – FAQs (here). The CBI has also published guidance notes (here) in relation to quarterly reporting by SPEs. Annual audited accounts of fund administrators, depositaries and AIFMs must be submitted to the CBI within four months of the relevant reporting period end. Fund administrators, depositaries and AIFMs are also required to submit certain other financial information to the CBI, including interim financial statements and the minimum capital requirement report. The appropriate reporting interval is advised to a fund administrator or depositary on an individual basis. Submission of financial returns can be made via the CBI’s online portal. |
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ESRB Policy Note regarding Corporate Debt and Real Estate Funds |
On 4 September 2023, the European Systemic Risk Board (“ESRB”) published a policy note (here) describing how the EU regulatory framework for investment funds (the UCITS and the AIFM Directives), currently under revision, could enhance the prevention and mitigation of systemic risks in the European financial system. The note focuses on investment funds with large exposures to corporate debt and real estate. |
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EIOPA Technical Advice on the Review of the IORP II Directive |
On 28 September 2023, the EIOPA submitted to the European Commission its technical advice (here) on the review of the IORP II Directive (2016/2341), which regulates the activities and supervision of institutions for occupational retirement provision (“IORPs”). Primarily, EIOPA’s advice:
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| Sanctions / Restrictive Measures | |
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Guidance for EU Operators on Enhanced Due Diligence |
On 7 September 2023, the European Commission published a guidance note (here) addressed to EU operators to help them identify, assess, and understand the possible risks of sanctions circumvention, and how to guard against circumvention. The guidance note provides a general overview of what is required of EU operators when conducting due diligence in their work, as required by EU law. |
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EU Sanctions against Russia |
The following items have been published in the Official Journal of the EU in respect of restrictive measures against Russia for actions violating the territorial integrity of Ukraine:
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| EMIR | |
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Joint Trade Association Statement on EMIR 3.0 |
On 7 September 2023, several European and international trade associations published a joint statement (here) on the European Commission’s legislative proposal (known as “EMIR 3.0”) to amend the European Market Infrastructure Regulation (“EMIR”) (648/2012) to mitigate excessive exposures to third-country central counterparties (“CCPs”) and improve the efficiency of clearing markets in the EU. The trade associations offer support to some of the measures that EMIR 3 would introduce, including the simplification of procedures for CCPs to launch products and change models, changes to collateral requirements, changes to participation requirements for non-financial counterparties (“NFCs”), and removal of the need to have an equivalence decision as a prerequisite to benefit from the intragroup transaction exemption. However, the joint statement “strongly” recommends deletion of EMIR 3’s proposed active account requirement (“AAR”). According to the trade associations' statement, this element of the proposal would: (i) negatively impact EU capital markets by introducing fragmentation and loss of netting benefits; (ii) make the EU less resilient to market stresses, without benefitting EU financial stability; (iii) create a competitive disadvantage for EU firms vis-à-vis third-country firms; and (iv) significantly increase the cost and risk of hedging for EU clients which could ultimately harm EU pension savers and investors. Signatories to the statement include the European Fund and Asset Management Association (“EFAMA”), Banking and Payments Federation Ireland (“BFPI”), the European Association of Co-operative Banks (“EACB”), the European Principal Traders Association (“FIA EPTA”), the Federation of Dutch Pension Funds, the Nordic Securities Association, Finance Denmark, the Alternative Investment Management Association (“AIMA”), FIA, ICI Global, and the International Swaps and Derivatives Association (“ISDA”). |
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Withdrawal of Recognition of CCP established in South Africa |
On 29 September 2023, ESMA announced (here) its withdrawal of the recognition decision concerning JSE Clear, a central counterparty (“CCP”) established in South Africa, as required by EMIR. The withdrawal follows the addition of South Africa, by the European Commission, to the list of high-risk third countries presenting strategic deficiencies in their national anti-money laundering and counter financing of terrorism (“AML/CFT”) regimes, on 16 July 2023. In order to minimise potential market disruption, ESMA has provided for an adaptation period of three months. The withdrawal of recognition decision will therefore enter into effect on 29 December 2023. From that date, the CCP concerned will no longer be permitted to provide clearing services to clearing members or trading venues established in the EU. ESMA has also updated its list (here) of third-country central counterparties (“TC-CCPs”) authorised to provide services in the European Union. |
| Fintech | |
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FSI Report on “Ireland’s Fintech Future” |
On 11 September 2023, Financial Services Ireland (“FSI”) published a report on Ireland’s fintech future (here). The report surveyed a range of financial services firms, including fintech start-ups and longer-established financial services firms that are digitalising their businesses. The survey shows the scale of investment made by firms, both in their own operations and in the wider Irish economy – with the majority of firms expecting digital investment to rise in the future. It also reports on challenges identified by firms, which include regulatory challenges and competition for technical talent. The report sets out a series of key recommendations. FSI is also calling on the CBI to examine its processes with regard to administering regulation, with a view to ensuring processes can be as streamlined and made as efficient as possible. |
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Digital Markets Act: European Commission designates “Gatekeepers” |
On 6 September 2023, the European Commission designated (here), for the first time, six “gatekeeper” platforms, pursuant to the EU Digital Markets Act (“DMA”) (2022/1925). In total, 22 core platform services provided by Alphabet, Amazon, Apple, ByteDance, Meta and Microsoft have been designated. The six gatekeepers now have six months to ensure full compliance with obligations under the DMA, in respect of each of their designated core platform services. For more information on the DMA, see our briefing here. |
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Establishment of DSA Transparency Database |
On 26 September 2023, the European Commission announced (here) the establishment of the DSA Transparency Database, to collect statements of reasons submitted by providers of online platforms, provided in accordance with Article 24(5) of the Digital Services Act (“DSA”) (2022/2065). For more information on the DSA, see our briefing here. |
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IMF Paper on Risks of Generative AI |
The International Monetary Fund (“IMF”) has published a paper (here), dated 22 August 2023, on risks associated with the use of generative artificial intelligence (“GenAI”) in financial services. The paper opines that GenAI holds immense promise for financial sector application, and that it has the potential to drive efficiency, improve consumer outcomes, and strengthen risk management and compliance. However, use of GenAI by firms should, according to the IMF, be approached with caution, particularly because of inherent risks associated with GenAI which could, if realised, undermine wider public trust in the financial sector. Potential risks identified by the IMF include embedded bias, privacy concerns, outcome opaqueness, performance robustness, unique cyber threats, and the potential for the creation of new sources and transmission channels of systemic risks. |
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ESAs deliver technical advice on DORA |
On 29 September 2023, the ESAs delivered a joint response (here) to a call for advice by the European Commission in respect of delegated acts under the Digital Operational Resilience Act (“DORA”) specifying further criteria for critical ICT third-party service providers (“CTPPs”) and determining oversight fees levied on such providers. For more information on DORA, see our briefing here. |
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Guidance for Financial Entities Within Scope of NIS 2 and DORA |
On 18 September 2023, the European Commission issued a communication (here) setting out guidelines on the application of Article 4 NIS 2 Directive (2022/2555) to financial entities that are also within the scope of DORA. In relation to such entities, the provisions of DORA relating to: information and communication technology (“ICT”) risk management (Article 6); management of ICT-related incidents and major ICT-related incident reporting (Article 17); digital operational resilience testing (Art 24); information-sharing arrangements (Article 25); and ICT third-party risk (Article 28) shall apply, rather than the equivalent provisions under the NIS 2 Directive. |
| AML/CFT | |
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List of High-Risk Third Countries Amended |
On 28 September 2023, Commission Delegated Regulation (EU) 2023/2070 (here) was published in the Official Journal, adding Cameroon and Vietnam to the EU list of high-risk third countries with strategic anti-money laundering and counter-terrorist financing deficiencies. The Delegated Regulation will enter into force on the twentieth day following that of its publication. |
| Payments | |
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FSB’s Stocktake of Data Standards relevant to Cross-Border Payments |
On 25 September 2023, the Financial Stability Board (“FSB”) published (here) its stocktake of international data standards relevant to cross-border payments. The report highlights fragmentation in national data frameworks as a main contributor to increased costs and difficulties in automating cross-border payments. The FSB invites submissions in relation to the impact of data framework requirements on cross-border payments, in order to identify where action should be prioritised. By early 2024, the FSB will develop recommendations, for public consultation, for promoting alignment and interoperability across data frameworks applicable to cross-border payments. |
| Crypto-Assets | |
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EBA Technical Advice on MiCA Regulation |
On 29 September 2023, the EBA published its response (here) to the European Commission’s call for advice on delegated acts to be adopted under the Markets in Crypto-Assets (“MiCA”) Regulation (2023/1114), relating to the criteria for determining the significance of asset-referenced tokens (“ARTs”) and electronic money tokens (“EMTs”), and to the supervisory fees that may be charged by the EBA to issuers of significant ARTs and significant EMTs. |
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CBI Guidance on Submissions by VASPs |
On 6 September 2023, the CBI published updated guidance (here) in respect of the submission of virtual asset service provider (“VASP”) registration forms and documentation via the CBI’s online portal. |
| Other | |
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Selected Consultations, Discussion Papers, Speeches and Reports Published |
Bank of England – The End of the (LIBOR) World as We Know It (Remarks by Ari Merali) (here) Basel Committee on Banking Supervision (“BCBS”) – Basel III Monitoring Report (here) CBI – Dynamic Change in Uncertain Times: Balancing Opportunity and Risk (Remarks by Derville Rowland, CBI Deputy Governor, Consumer and Investor Protection, delivered to the Association for Financial Markets in Europe (“AFME”) (here) CBI – Feedback Statement CP147: Application of the Minimum Competency Code 2017 and the Minimum Competency Regulations 2017 to Credit Union Core Services (here) CBI – Insurance Newsletter: September 2023 (here) CBI – ISBAR: Scope and Reporting Guidelines (here) Courts Service – Annual Report 2022 (here) EBA – Annual Work Programme 2024 (here) ECB – Come Hell or High Water: Addressing the Risks of Climate and Environment-related Litigation for the Banking Sector (Remarks by Frank Elderson) (here) EIOPA – Annual Work Programme 2024 (here) ESMA – Annual Work Programme 2024 (here) ESMA – ESEF Reporting Manual (here) (updated 31 August 2023) ESMA – Overview of Planned Consultation Papers 2023 (here) European Commission – Report on the Implementation of the Recovery and Resilience Facility (“RRF”) (Second Annual Report) (here) FSB – Consultation on Financial Resources and Tools for Central Counterpart Resolution (here) (consultation runs until 20 November 2023) Government of Ireland – Legislation Programme: Autumn 2023 (here) IMF and the Financial Stability Board (“FSB”) – Policies for Crypto-Assets (here) Insurance Ireland – Insurance Recovery and Resolution Directive: Key asks ahead of the EU Trilogues (here) Insurance Ireland – Solvency II Review: Key asks ahead of the EU Trilogues (here) International Capital Market Association (“ICMA”) – European Secondary Bond Market Data: H1 2023 (Report of the Secondary Market Practices Committee) (here) International Organization of Securities Commissions (“IOSCO”) – Consultation on Policy Recommendations for Decentralised Finance (here) (consultation runs until 19 October 2023) IOSCO – Leveraged Loans and CLOs: Good Practices for Consideration (here) (consultation runs until 15 December 2023) IOSCO – Thematic Analysis: Emerging Risks in Private Finance (Final Report) (here) ISDA – ISDA in Review: September 2023 (here) ISDA – ISDA Quarterly (Vol 9, Issue 3) (here) Joint Committee of the ESAs – Annual Work Programme 2024 (here) Network for Greening the Financial System (“NGFS”) – Nature-related Financial Risk: A Conceptual Framework to guide Action by Central Banks and Supervisors (here) Pensions Authority – Annual Report 2022 (here) |
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