Financial Services Regulation and Compliance - Banking and Payments March 2024
Domestic
Countercyclical capital buffer to be maintained at 1.5%
On 5 March 2024, the Central Bank of Ireland (CBI) announced that it was maintaining the countercyclical capital buffer (CCyB) rate on Irish exposures at its current announced level of 1.5%.
The CBI noted that this announcement reflects no change to its policy stance for the CCyB and that the CBI’s strategy considers a CCyB rate of 1.5% to be appropriate in the context of the current macro-financial environment. The CBI noted that while pockets of risk materialisation, which would warrant a release of the buffer, are evident, these have not yet crystallised.
The 1.5% rate on Irish exposures will come into effect on 7 June 2024, having been initially announced in June 2023.
Central Bank of Ireland’s response to the proposed National Payments Strategy
On 4 March 2024, the CBI published its response to the Department of Finance's public consultation on the proposed National Payments Strategy (NPS), which was initiated on 12 December 2023.
The NPS was recommended as a product of the 2022 Retail Banking Review to set out a roadmap for the future evolution of the payments system, taking into account developments in digital payments. The NPS is primarily focused on consumers and small businesses within the retail payment system.
The CBI’s response outlined four overarching high-level priorities under which specific recommendations were set out. The CBI noted that their ultimate vision for the payments ecosystem in Ireland aligns fully with the core pillars outlined in the NPS consultation of ensuring access and choice, safeguarding security and resilience, fostering innovation and inclusion and promoting sustainability and efficiency.
Benefits of innovation in payments for domestic consumers remain untapped - Vasileios Madouros, Deputy Governor of Central Bank of Ireland
On 4 March 2024, Deputy Governor of the CBI, Vasileios Madouros, addressed the Banking and Payments Federation of Ireland’s National Payments Conference and noted the progress and deficiencies in Ireland’s payment systems from the past decade.
Despite advancements, Madouros noted that the instant payment infrastructure had not yet been fully implemented by material providers of payment accounts, which is unsatisfactory for consumers and businesses. Madouros emphasised Ireland’s potential for innovation in payments, urging greater utilisation of technology. He highlighted the importance of the NPS as an opportunity for change.
Madouros also noted the following four high level priorities proposed by the CBI through to the end of 2030:
- promoting innovation and integration
- safeguarding cash as a means of payment
- maintaining security and resilience in payments
- enhancing research and analytical insights
Madouros concluded by stating the long-term opportunity posed by the NPS for Ireland while also stressing the need for a managed approach from a public policy perspective.
Central Bank of Ireland's response to the Committee on Finance, Public Expenditure and Reform, and Taoiseach on the Access to Cash Bill 2024
On 8 March 2024, the Deputy Governor of the CBI, Vasileios Madouros, published his response to the Joint Committee on Finance, Public Expenditure and Reform, and Taoiseach's letter seeking submissions as part of the pre-legislative scrutiny of the General Scheme of the Access to Cash Bill 2024 (the Bill) published by the Department of Finance.
Madouros noted that the CBI welcomed the Bill and considered it an important public policy intervention. The Deputy Governor stated that the Bill places responsibilities appropriately to the relevant stakeholders within the cash system and noted that there is an inherent responsibility on all cash cycle participants to ensure that reasonable access to cash (RAC) is maintained for consumers in Ireland. Madouros also approved the metrics by which the Bill makes criteria for RAC based on proximity and noted that the CBI will monitor compliance with the RAC criteria quarterly.
The Deputy Governor noted the importance of continued consideration of the operation of the framework to ensure that it appropriately balances the key trade-offs from a societal perspective.
European
Instant Payments Regulation published in the Official Journal
On 19 March 2024, the Instant Payments Regulation (Regulation (EU) 2024/886) (the Regulation) was published in the Official Journal.
The Regulation will make instant payments fully available in euro to individuals and businesses in the European Economic Area (EEA). The Regulation will amend the Single Euro Payments Area Regulation (Regulation ((EU) 260/2012), the Cross-Border Payments Regulation (Regulation ((EU) 2021/1230), the Payment Services Directive 2 (EU) 2015/2366) and the Settlement Finality Directive (Directive 98/26/EC).
Banks and other payment service providers, that provide standard credit transfers in euro, will be required to offer the service of sending and receiving instant payments in euro to all individuals and businesses holding a bank account in the EEA. Instant payments will allow for the transfer of funds within ten seconds at any time of the day, including outside business hours, within the same EEA member state or to another EEA member state.
Payment service providers located in the euro area will have nine months to be ready to receive instant credit transfers in euro and 18 months to send them. The Regulation enters into force on 8 April 2024.
EBA consults on technical standards on off-balance sheet items under the standardised approach
On 4 March 2024, the European Banking Authority (EBA) launched a public consultation on its draft regulatory technical standards (RTS) required under the Capital Requirements Regulation (CRR) regarding off-balance sheet items under the standardised approach of credit risk.
The RTS provide the criteria that credit institutions shall use to classify off-balance sheet items, unless explicitly specified in Annex 1 of the CRR. They also specify the factors that may constrain the institutions’ ability to cancel the unconditionally cancellable commitments.
The draft RTS are part of phase 1 of the EBA’s roadmap on the implementation of the EU banking package.
The consultation runs until 4 June 2024.
EBA publishes final guidelines on national lists or registers of credit servicers
On 5 March 2024, the EBA published its final guidelines on national lists or registers of credit servicers.
The guidelines are addressed to competent authorities managing the lists or registers and specify the content of the lists or registers, how they are to be made accessible and the deadlines for updates. The lists or registers should facilitate borrowers’ access to information on complaint handling procedures offered by competent authorities.
Additionally, the guidelines specify that the lists shall always be accessible electronically for free without the need for prior registration. The guidelines also set the deadlines by which competent authorities have to update the lists or registers.
ECB and EBA launch joint committee to harmonise and integrate bank data reporting
On 18 March 2024, the European Central Bank (ECB) and the EBA signed a Memorandum of Understanding establishing the Joint Bank Reporting Committee (JBRC).
The JBRC was established to help develop common definitions and standards for the data that banks are required to report for statistical, supervisory and resolution purposes. A main deliverable of the JBRC will be the composition of a common data dictionary for the reporting of data.
The JBRC will be comprised of the ECB, the EBA, the European Commission (the Commission), the Single Resolution Board (SRB), along with the relevant authorities with the power to issue supervisory, resolution and statistical reporting requirements in EEA member states. The banking industry will also be represented through a consultative board, the Reporting Contact Group.
The initiative is part of the Commission’s supervisory data strategy and coincides with the proposed Regulation to amend certain financial services and investment support Regulations as regards certain reporting requirements.
EBA updates list of institutions involved in the 2024 supervisory benchmarking exercise
On 20 March 2024, the EBA published an updated list of institutions, which have a reporting obligation for the purpose of the 2024 EU supervisory benchmarking exercise.
The EBA will conduct the 2024 benchmarking exercise on a sample of 110 institutions from 16 countries across the EU and the EEA.
This exercise leverages established data collection procedures and formats of regular supervisory reporting and assists with the assessment of the quality of internal approaches used to calculate risk weighted exposure amounts.
EBA extends deadline of call for expression of interest for its new Banking Stakeholder Group
On 26 March 2023, the EBA extended the deadline for applications to the call for expression of interest to set up its new Banking Stakeholder Group and create a reserve list.
The call for expression of interest is open to candidates representing stakeholders across the EU. The deadline was extended to 9 April 2024.
Council adopts ‘Daisy Chains Directive’ on indirect subscription claims
On 26 March 2024, the Council of the European Union (the Council) adopted a Directive amending the Bank Recovery and Resolution Directive (Directive 2014/59/EU) and the Single Resolution Mechanism Regulation (Regulation (EU) 806/2014) to include targeted proportionality requirements to the treatment of internal minimum requirements for own funds and eligible liabilities (MREL) in bank resolution groups (the Daisy Chains Directive).
The Daisy Chains Directive provides the conditions for the application of the consolidated treatment of internal MREL and sets out the concept and scope of liquidation entities. The new rules seek to empower the resolution authorities to set internal MREL on a consolidated basis subject to certain conditions. Where a resolution authority allows a banking group to apply such consolidated treatment, the intermediate subsidiaries will not be obliged to deduct their individual holdings of internal MREL.
The new rules also introduce a specific MREL treatment for liquidation entities. These are entities within a banking group earmarked for winding up in accordance with insolvency laws, and would, therefore, not be subject to resolution action (conversion or write-down of MREL instruments). Liquidation entities will not be obliged to comply with an MREL requirement, unless decided otherwise.
The text of the Daisy Chains Directive will now be published in the Official Journal and will enter into force 20 days after publication.
‘Making banks resilient to climate and environmental risks - good practices’ - Remarks by ECB executive board member to European Banking Federation
On 14 March 2024, Frank Elderson, Member of the Executive Board and Vice-Chair of the Supervisory Board of the ECB delivered a speech to the European Banking Federation (EBF) Executive Committee on the climate-related and environmental (C&E) risks facing EU banks, the current state of C&E risk management within banks and the good practices that banks can implement, including the good practices observed by the ECB in its climate stress test and 2022 thematic review.
Elderson noted the impact of climate risk on banks and operations from an IT infrastructure perspective and the importance of building internal capacity to gauge C&E risks. Elderson acknowledged the implementation challenges but noted that every one of their expectations had been fulfilled by at least one bank. Elderson also commended several banks which had implemented risk management practices focused explicitly on nature-related risks.
2024 will be a crucial year for work on bank resilience and, by year end, all banks will be expected to be aligned with the supervisory expectations. 2024 will also be an important year for disclosures and Elderson noted the work required by banks to meet their obligations in this regard.
Elderson concluded by acknowledging the progress that has been made since initial dialogues on C&E risks and highlighted the work still to be done as a result of the future economic impact of climate and nature crises.
Single Resolution Board consults on minimum bail-in data template
On 13 March 2024, the SRB opened its public consultation on the minimum bail-in data template (MBDT) package (the consultation), providing an integrated approach for implementing the SRB bail-in data set instructions and explanatory note published in 2020 and updated in 2022, by enhancing its definitions and providing a template to ensure structured and standardised data collection across banks under the SRB’s remit.
The MBDT will replace the SRB bail-in data set instructions and explanatory note, as it will represent the sole standard to report data relevant for the operationalisation of the bail-in. The consultation aims at gathering stakeholders’ views on content of the MBDT documentation, data point model and format, and data collection process.
The consultation will close on 8 May 2024.
Updated European Payments Council guidelines on cryptographic algorithms usage and key management
On 13 March 2024, the European Payments Council (EPC) published a new version of its guidelines on cryptographic algorithms usage and key management document.
The guidance contains recommendations for the European payment industry on algorithm usage and key management issues that payment service providers may consider together with their own security policy and the relevant professional or national rules and regulations which they are required to comply with.
The new version includes updates related to authenticated encryption, homomorphic encryption and an overall review of referred standards and algorithms. In producing the guidelines, the EPC aims to provide a reference basis to support payment service providers. The EPC will annually review and update the document to keep in line with the constantly evolving research and developments in the field of cryptology.
Commissioner McGuinness addresses Annual Payments Conference 2024
On 4 March 2024, Mairead McGuinness, Commissioner for financial services, financial stability and Capital Markets Union, addressed the Annual Payments Conference 2024, hosted by the Banking & Payments Federation Ireland (BPFI).
McGuinness noted the impact of small changes in the payments industry on the lives of citizens and discussed the rapid pace of change in payment systems, accelerated in part by the Covid-19 pandemic. These innovations have brought competition and choice for consumers, which also bring problems.
McGuinness discussed current challenges for payments as consisting of fragmentation in implementation across national lines, fraud prevention and the need for consumer protection. She also discussed policy initiatives and Regulations aimed at fostering innovation, competition and consumer choice while ensuring financial stability.
McGuinness discussed the importance of the European single market in payments, the role of instant payments and the potential of a digital euro. She also discussed open banking, financial data sharing, and the ongoing negotiations and proposals aimed at developing innovation and competition in the payment sector.
For more information on these topics please contact any member of A&L Goodbody's Financial Regulation Advisory team.
Date published: 22 April 2024