Financial Services Regulation and Compliance - Banking and Payments September 2023

Domestic

Minister McGrath publishes the Consumer Banking Sentiment Survey 2023 and Financial Consumer Protection Roadmap

On 13 September 2023, the Minister for Finance, Michael McGrath, published the Consumer Banking Sentiment Survey 2023. A nationally representative sample of individuals were interviewed face to face to get an in-depth understanding of consumers’ experiences and perceptions of the retail banking sector in Ireland.

Of the sample, 34% stated they were very happy with their main financial provider, an increase of 3 points from 2022. Overall satisfaction remains steady at 82%, with dissatisfaction at 6%. The survey also reports that the use of ‘fintech’, which includes contactless payments by customers of traditional banks has increased with the market share of “digital only banking providers” increasing as well.

Also published on the same day was the Financial Consumer Protection Roadmap. Its purpose is the ensure a coordinated focus remains on developing consumer protection policies.

CBI publishes its Regulatory Service Standards Performance Report for January - June 2023

On 28 August 2023, the Central Bank of Ireland (CBI) published its Regulatory Service Standards Performance Report (the report) for January - June 2023 which sets out the CBI’s performance against its service standards that it has committed itself to in respect of:

  • authorisation of financial service providers and investment funds
  • approval of prospectuses
  • assessment of pre-approval controlled function individual questionnaire applications
  • performance of its third-party contact management service

The report found that of the 46 public service standards used to measure the CBI’s performance, 30 were met or exceeded and 16 did not apply. The report provides detail on each of the service standards as well as CBI achievements for H1, in particular the implementation of the CBI’s new fitness and probity portal.

European

ECB Decisions and Regulation concerning the Single Supervisory Mechanism

On 1 September 2023, the following decisions and regulation were published in the Official Journal of the European Union;

  • European Central Bank (ECB) Decision 2023/1680 on the reporting of funding plans of supervised entities by Member State competent authorities to the ECB. The decision requires Member State competent authorities to provide the funding plans of certain supervised entities to the ECB and establish procedures to do so.
  • ECB Decision 2023/1681 on the provision to the ECB of supervisory data reported to Member State competent authorities by the supervised entities. The decision sets down the procedures concerning the submission to the ECB of the information reported to Member State competent authorities by supervised entities, in accordance with Implementing Regulation (EU) 2016/2070, Implementing Regulation (EU) 2021/451 and Implementing Regulation (EU) 2021/453.
  • Regulation (EU) 2023/1678 of the European Central Bank of 17 August 2023 amends Regulation (EU) 2015/534 of European Central Bank of 17 March 2015 on reporting of supervisory financial information (ECB/2015/13) to align the submission of supervisory financial information to the ECB by Member State competent authorities with the provisions of ECB Decision 2023/1681.

Council of the European Union publishes Consumer Credit Directive II

On 21 September 2023, the Council of the European Union published the text of the new proposed Consumer Credit Directive (CCD). The emergence of new technology and products as well the evolution of consumer behaviour and preferences required an update to the previous 2008 CCD. The proposed revised CCD extends and clarifies the scope of the previous directive by including consumers who take out loans below €200, leasing agreements, or ‘buy now pay later’ schemes. It also extends protections to consumers in financial difficulty by allowing them to postpone payments and accessing debt advisory services.

The revised CCD will enter into force 20 days after it has been published in the official Journal of the EU.

European Commission publishes Commission Delegated Regulation with regard to specifying the criteria for the identification of shadow banking entities referred to in Article 394(2)

On 6 September 2023, the European Commission published the Commission Delegated Regulation with regard to regulatory standards (RTS) specifying the criteria for the identification of shadow banking entities referred to in Article 394(2) of Regulation (EU) No 575/2013 (the Capital Requirements Regulation, CRR).

The Delegated Regulation specifies:

  • criteria for identifying both shadow banking and non-shadow banking entities
  • the definition of banking activities and services. The Delegated Regulation recognises that the CRR does not define what shadow banking entities are but summarises that shadow banking is a system of credit intermediaries that involves entities and activities outside the regular banking system
  • the criteria for excluding entities established in third countries from being deemed as shadow banking entities

The Delegated Regulation will enter into force 20 days after its publication in the Official Journal of the European Union, on the 26 of September 2023.

Fabio Panetta, Member of the Executive Board of the ECB, delivers speech on the digital euro

On 4 September 2023, Mr. Panetta gave an update on the latest phase of the ECB investigation of the digital euro. The ECB have completed a holistic review to ensure consistency between all design options, published the results of the protype and market research exercises and will publish next month the ECB’s findings of the investigative phase.

Mr. Panetta explained that following the publication, the Governing Council will decide whether to progress to the next phase. The next phase will involve analysing digital euro functionalities by the central banks of all euro countries and testing technical solutions and business arrangements to start the issuing of a digital euro.

Mr. Panetta emphasised that the legislative proposals on the digital euro would include ensuring the legal tender status of cash and that legislators must shape the proposals so that the digital euro only replicates the key features of cash within the digital sphere.

The availability of the digital euro to everyone is a key concern and there are a number of elements that Mr. Panetta outlined to ensure it is available to all. These include how the digital euro may enhance privacy and data protection and reduce money laundering risks, as well as pricing, with end users being able to use the basic service free of charge and merchants being protected from any excessive fees from the obligation to accept digital euro.

EBA issues revised list of ITS validation rules

On 11 September 2023, the European Banking Authority (EBA) issued its revised list of validation rules for its implementing technical standards (ITS) on supervisory reporting. The competent authorities in the EU will validate data against these new set of rules.

Frank Elderson, Member of the Executive Board of the ECB delivers speech on how culture drives risk in banks and what supervisors can do about it

On 19 September 2023, the ECB published a speech by Frank Elderson, Member of the Executive Board of the ECB and Vice-Chair of the Supervisory Board of the ECB. The speech discusses what behaviour and culture the ECB assesses in banks, the tools it uses to carry out these assessments and the challenges it faces.

The ECB considers behaviour and culture is part of its supervision of banks’ internal governance and therefore examines banks’ governance policies and management body as well as behaviour within the governance structures. The ECB can supervise behaviour in two methods: boardroom observation where they can assess whether constructive challenge is taking place on boards, and interviews of board members or business line representatives.

The ECB is currently reviewing its guide on governance and risk culture and plans to publish its review at the end of 2024. The guide will detail the ECB’s supervisory expectations on governance, risk management and risk culture.

EBA launches 2023 EU-wide transparency exercise

On 22 September 2023, the EBA launched its annual EU-wide transparency exercise with 124 banks participating in the exercise.

The exercise examines the capital positions, financial assets, risk exposure amounts, sovereign exposures and asset quality information of the EU banking sector, covering the second half of 2022 and the first half of 2023.

The EBA expects to publish the results, together with the annual assessment report, at the beginning of December 2023.

Basel III Monitoring Exercise Results based on Data as of 31 December 2022

On 26 September 2023, the EBA published a report summarising the results from the Basel III monitoring exercise based on data as of 31 December 2022. The report provides an assessment of the impact of the full baseline Basel III implementation based on the exercise.

The main finding from the exercise is that in order to comply with the new framework, EU banks would need a total of €600m of additional Tier 1 capital at the full implementation date in 2028 due to the output floor and credit risk capital requirements.

For more information on these topics please contact any member of A&L Goodbody's Financial Regulation Advisory team.

Date published: 25 October 2023