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Department of Finance consults on the implementation of CRD VI
On 16 January 2025, the Department of Finance (the Department) published its consultation on the implementation of the Capital Requirements Directive VI (Directive EU 2024/1619) (CRD VI), which amends the Capital Requirements Directive (Directive 2013/36/EU) (CRD). The Department notes that the majority of the amendments to CRD must be transposed on a fully harmonised basis. However, there are a number of provisions that Member States are given discretion as to whether and how to apply these provisions.
The Department are inviting comments on whether particular discretions outlined in the announcement should be availed of, how they should be availed of and clear reasoning for such a position. The consultation period will run until 14 February 2025.
EBA publishes an opinion on the interaction between the output floor and Pillar 2 Requirements
On 21 January 2025, the European Banking Authority (EBA) published an opinion on the interaction between the output floor and Pillar 2 Requirements (P2R) in the context of the mandate set forth in the CRD.
The opinion sets out that the calculation of P2R to be temporarily based on the unfloored total risk exposure amount when an institution first becomes bound by the output floor, applying the P2R percentage from the last Supervisory Review and Evaluation Process (SREP) cycle. Emphasis is placed upon early notification of potential impacts by institutions to the competent authorities.
It is expected that only offsets regarding P2R add-ons in relation to “regulatory model deficiencies” will be considered by the competent authorities in their review on double-counting; with the EBA advising the competent authorities to consider how best to avoid undue arithmetic effects from the output floor in the review on double counting.
This opinion is to be considered in the upcoming review of the EBA guidelines on the SREP.
EBA launches its 2025 EU-wide stress test
On 20 January 2025, the EBA launched its 2025 EU-wide stress test which will be conducted on a sample of 64 banks. The purpose of the test is to assess the resilience of the European banking system over a span of three years (2025-2027), based on a hypothetical narrative involving the worsening of geopolitical tensions, with significant trade and confidence shocks impacting on domestic and global consumption and investments. Results are expected to be published by the EBA in August 2025 and will assess the overall resilience of EU banks to severe economic shocks, sufficiency of bank capital levels to ensure support of the economy in periods of stress, fostering of market discipline and providing input to the SREP.
EBA repeals the guidelines on major incident reporting under the revised Payment Services Directive
On 17 January 2025, the EBA repealed its guidelines on major incidents reporting under the Payment Services Directive (EU 2015/2366) (PSD2) in line with the Digital Operational Resilience Act (Regulation (EU) 2022/2554) (DORA) coming into effect.
The repeal of the guidelines aligned with the introduction of DORA’s harmonised incident reporting requirements applicable to financial entities including most PSPs; credit institutions, payment institutions, e-money institutions and account information service providers. Further to this, DORA disapplied the incident reporting requirements under PSD2 for those PSPs.
Accordingly, the repeal of the EBA guidelines aims to provide legal certainty and simplify reporting of major incidents by payment service providers (PSPs) under PSD2. Notwithstanding the repeal of the guidelines, the incident reporting requirements under PSD2 will continue to apply for PSPs that are not covered by DORA and can be subject to national incident reporting requirements.
The EBA consults on guidelines on ESG scenario analysis
On 16 January 2025, the EBA launched a public consultation on its draft guidelines on ESG scenario analysis.
The draft guidelines form part of the framework for testing the financial and business model resilience to the impacts of ESG factors such as climate change, environmental degradation and social issues, as well as laying down expectations for institutions to ensure safety and support decision making.
Comments to the consultation paper can be submitted until the deadline of 16 April 2025 which the EBA will consider in finalising the guidelines. A virtual public hearing on the consultation paper will also be held on 17 March 2025 and those interested are invited to register by 13 March 2025.
EBA publishes its peer review on the application of proportionality under the Supervisory Review and Evaluation Process
On 16 January 2025, the EBA published its peer review on the application of proportionality under SREP, which was carried out on six competent authorities.
There were largely positive results on the application on proportionality and liquidity assessment under SREP. Conversely, consistency of implementation of the SREP guidelines, sources used for SREP categorisation and implementation of the minimum supervisory engagement model were among the deficiencies identified. The EBA set out measures for all competent authorities across the European Economic Area (EEA) to address these deficiencies, such as classifying ‘large’ and ‘small and non-complex' institutions under the Capital Requirements Regulation (CRR) into the categorisation of institutions for SREP purposes and aligning to the minimum supervisory engagement model and in the area of liquidity stress testing.
The peer review also strongly encourage the use of the provisions in the SREP guidelines for the application of proportionality in the SREP, noting from the peer review that many of these were not being effectively used. In two years’ time, a follow-up review will be conducted by the EBA.
EBA publishes its final guidelines on the management of ESG risks
On 9 January 2025, the EBA published its final guidelines on the management of ESG risks. By way of background, the EBA is mandated in accordance with Article 87a(5) of CRD VI to issue guidelines on minimum standards and reference methodologies for the identification, measurement, management and monitoring of ESG risks by institutions.
The guidelines specify requirements regarding the internal processes and ESG risk management arrangements that institutions should have in place in accordance with CRD VI. The guidelines also specify the content of plans to be prepared by institutions with a view to monitoring and addressing the financial risks stemming from ESG factors, including those arising from the adjustment process towards the objective of achieving climate neutrality in the EU by 2050. These plans will support the preparedness of institutions for the transition and should be consistent with transition plans prepared or disclosed by institutions under other pieces of EU legislation.
The guidelines will apply from 11 January 2026 except for small and non-complex institutions for which the guidelines will apply at the latest from 11 January 2027.
EBA consults on RTS on the calculation and aggregation of crypto exposure values
On 8 January 2025, the EBA published a consultation paper on draft RTS on the calculation and aggregation of crypto exposure values under the Capital Requirements Regulation III ((EU) 2024/1623 amending Regulation (EU) No 575/2013) (CRR III).
By way of background, CRR III includes a transitional prudential treatment for banks’ exposures in crypto-assets taking into account ongoing international developments in this area and the legal requirements introduced in the Markets in Crypto Assets Regulation ((EU) 2023/1114) (MiCAR). The transitional treatment specifies the capital treatment of tokenised traditional assets (including electronic money tokens, asset referenced tokens and other crypto-assets).
Article 501d(5) of the CRR III mandates the EBA to develop draft RTS to specify the technical elements necessary for institutions to calculate their own funds requirements in accordance with the approaches set out in Article 501d (2), points (b) and (c), including how to calculate the value of the exposures in crypto-assets and how to aggregate short and long positions in crypto-assets for the purposes of the calculation during the transitional period and for the application of the total exposure limit in other crypto-assets (i.e. 1% of an institution’s Tier 1). In doing so, the EBA is required to take into consideration the international standards developed by the Basel Committee on Banking Supervision (BCBS), as well as requirements laid down under MiCAR.
The draft RTS:
The deadline for comments on the consultation paper is 8 April 2025 and the EBA will hold a virtual public hearing on 4 March 2025.
ECB publishes decision on access by non-bank payment service providers to Eurosystem central bank operated payment systems and central bank accounts
On 28 January 2025, the European Central Bank (ECB) published their decision on access by non-bank payment service providers to Eurosystem central bank operated systems and central bank accounts.
The decision addresses access to central bank operated payment systems, accounts in central bank operated payment systems and non-offering of safeguarding accounts, maximum holding amounts, noncompliance with maximum holding amount limit or requirements for access to central bank operated payment systems and amendment of terms and conditions of central bank operated payment systems.
The decision shall apply from 9 April 2025.
For more information on these topics please contact any member of A&L Goodbody's Financial Regulation Advisory team.
This publication provides an overview of certain legal and regulatory developments that may be of interest to certain entities. It does not purport to provide analysis of law or legal advice and is strictly for information purposes only.