Director of Consumer Protection, Colm Kincaid comments on the future of customer engagement and banking channels
On 11 June 2024, Director of Consumer Protection, Colm Kincaid addressed challenges faced within the banking and payments sector. Mr Kincaid stated that these challenges include the delivery of digitalisation and enhancement programmes by firms in a background where consumers’ expectations of service are evolving, along with the threats posed by fraud and cybercrime.
Mr. Kincaid considered there to be three key parts to the regulatory framework that tries to deal with these challenges. This includes:
Commission Implementing Regulation (EU) 2024/1618 amending ITS on reporting and disclosure of MREL and TLAC published in Official Journal
On 6 June 2024, Commission Implementing Regulation (EU) 2024/1618 amending Implementing Regulation (EU) 2021/763 laying down implementing technical standards (ITS) with regard to the supervisory reporting and public disclosure of the minimum requirement for own funds and eligible liabilities (MREL) and total loss absorbing capacity (TLAC) was published in the Official Journal.
The Commission Implementing Regulation will enter into force on 27 June 2024 and apply from 27 December 2024.
EBA publishes package of governance regulatory products under the Markets in Crypto-Assets Regulation
On 6 June 2024, the European Banking Authority (EBA) published a package of draft guidelines and regulatory technical standards (RTS) under the Markets in Crypto-Assets Regulation (MiCAR). These products are part of the measure in places to regulate the crypto-assets market.
The package of EBA regulatory products introduced includes:
EBA consults on new framework for the operational risk loss in conjunction with the EU Banking Package
On 6 June 2024, the EBA, launched a public consultation on three sets of draft RTS under Regulation (EU) No 575/2013 (Capital Requirements Regulation (CRR)). The draft RTS seek to harmonise the collection and recording of operational risk losses and provide clarity on the exemptions for the calculation of the annual operational risk loss and on the adjustments to the loss data set that banks must perform in case of merged or acquired entities or activities.
The three draft RTS’ for which the consultation has been launched include:
Comments on the draft RTS must be submitted to the EBA by 6 September 2024.
EBA publishes package of technical standards and guidelines under MiCAR
On 14 June 2024, the EBA published guidelines on recovery plans required to be maintained by issuers along with five draft RTS’ including:
EBA publishes technical standards and guidelines under MiCAR on reporting, liquidity stress testing and supervisory colleges
On 19 June 2024, the EBA published guidelines on liquidity stress testing along with two draft RTS and one ITS including:
The draft RTS and ITS will be submitted to the European Commission for endorsement following which they will be subject to scrutiny by the Parliament and the Council before being published in the Official Journal. The guidelines are in final form and will apply two months after publication of all the translations on the EBA website.
ECB publishes Opinion on a proposed Regulation and Directive on payment and electronic money services
On 19 June 2024, the European Central Bank (ECB) published its opinion on a proposed Regulation of the Parliament and of the Council on payment services in the internal market amending Regulation (EU) No 1093/2010 and Directive of the Parliament and of the Council on payment services and electronic money services in the Internal Market amending Directive 98/26/EC and repealing Directives 2015/2366/EU and 2009/110/EC (the proposed Acts).
The proposed Acts seek to strengthen user rights and protection against fraud, enhance competition, improve enforcement and implementation by EU Member States and improve access to payment systems and bank accounts for non-bank payment service providers.
In its opinion, the ECB noted its strong support for the proposed Acts stating that it will provide increased clarity in the rules on ‘open banking’. In particular, the ECB welcomed:
The ECB flagged the interconnectedness of the proposed Acts with the MiCAR, noting that the definition of e-money tokens in MiCAR merits attention. The ECB stated in its opinion piece that those e-money tokens meet the requirements of e-money. Therefore, the applicable prudential requirements in the proposed directive should apply to them, as well as the proposed regulation's safeguards for the benefit of consumers. The ECB also flagged that the proposed Acts should address crypto-lending services which have not been captured under MiCAR or any EU legislative acts.
Council of the European Union agrees position on bank crisis management and deposit insurance framework
On 19 June 2024, the Council agreed on a negotiating mandate on the review of the crisis management and deposit insurance (CMDI) framework for banks. The review aims to strengthen the existing EU crisis management framework, particularly for small and medium sized banks, and is a further step towards completion of the Banking Union. The Council noted that the revised framework will improve financial stability, provide better protection of deposits and taxpayers money along with levelling the playing field between large and small banks.
The Council confirmed that it is now ready to engage in negotiations with the Parliament and on the final shape of the framework. Once an agreement is reached between Council and Parliament, the framework will have to be formally adopted before becoming law.
Pillar 3 disclosure framework updated by EBA
On 21 June 2024, the EBA published the final draft ITS on public disclosures by institutions that implement the changes in the Pillar 3 disclosure framework introduced by the amending Regulation (EU) 2024/1623 (CRR 3). The new ITS introduces new and amending disclosure requirements on output floor, credit risk, market risk, CVA risk, operational risk and a transitional disclosure on exposures to crypto assets.
The ITS signals the first Pillar 3 deliverable included in the EBA roadmap on strengthening the prudential framework which was published in December 2023. Later this year, the EBA will issue CRR 3 disclosure requirements that are not directly linked to the Basel III implementation. The ITS will extend the disclosure requirements on ESG risks to all institutions in accordance with the proportionality principle, and new disclosure requirements on shadow banking.
EBA publishes amendments to counterparty credit risk standards forming part of the implementation of the Banking Package
On 24 June 2024, the EBA published its final draft amending RTS on the standardised approach for counterparty credit risk (SA-CCR). This RTS forms part of the EBA’s roadmap on the banking package in the EU. The RTS specifies the formula to calculate the supervisory delta of options under the SA-CCR framework which extends the current formula to include commodity options compatible with negative commodity prices.
Guidelines on suitability of management body members and shareholders for entities under MiCAR published by EBA and ESMA
On 27 June 2024, the EBA and the European Securities and Markets Authority (ESMA) published joint guidelines on the suitability of members of the management body, and on the assessment of shareholders and members with qualifying holdings for issuers of ARTs and CASPs, under the MiCAR. The two sets of guidelines complement the governance package recently published and form part of the EBA and ESMA‘s ongoing efforts to foster a secure, and well-regulated crypto-assets market.
The first set of guidelines deals with the presence of suitable management bodies within issuers of ARTs and CASPs. They provide common criteria to assess the knowledge, skills, experience, reputation, honesty and integrity of members of the management body, as well as criteria to assess sufficient time commitment.
The second set of guidelines covers the assessment of the suitability of shareholders or members with direct or indirect qualifying holdings in a supervised entity. It provides a common methodology to competent authorities to assess the suitability of the shareholders and members with direct or indirect qualifying holdings for the purpose of granting authorisation as issuers of ARTs or as CASPs, whilst also providing a methodology for carrying out the prudential assessment of proposed acquisitions.
EBA publishes updated report on the monitoring of Additional Tier 1, Tier 2 and TLAC/MREL eligible liabilities instruments of credit institutions
On 27 June 2024, the EBA published an updated report on the monitoring of Additional Tier 1 (AT1), Tier 2 and TLAC as well as the MREL instruments of EU credit institutions (the report).
The report clarifies that the prudential valuation of capital instruments should reflect their actual loss absorbency capacity, meaning that such instruments should be measured on the basis of the amount of common equity tier one (CET1) capital that would be generated in the event of a write-down or conversion, being the carrying amount with no adjustment. It also prescribes the conditions under which different loss absorbency mechanisms (conversion and write-down) and trigger levels can operate simultaneously within the same institution, with the need to fully adhere to the EBA existing guidance and AT1 standardised templates.
The EBA will continue to monitor the quality of the AT1, Tier 2 and TLAC/MREL instruments and is set to provide additional guidance where necessary.
EU to delay implementation of rules on market risk by one year to 1 January 2026
On 18 June 2024, the European Commissioner for financial services, Mairead McGuinness, announced that the EU is planning to postpone the date of application of a core element of the Basel III reforms, namely rules on market risk, the ‘Fundamental Review of the Trading Book’ (FRTB). The proposal would be subject to approval from the Parliament and the Council. If enacted, it would mean that the market risk rules in question would apply from 1 January 2026.
The move is prompted by the delays in implementation of this aspect of the Basel III reforms in the US. European banks and governments have been worried that the slower implementation in the US would put European lenders’ competitiveness at risk.
The proposal would only apply to the FRTB market risk rules, meaning that “the bulk of the Basel standards” will be implemented in January 2025, as expected.
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.
