Financial Services Regulation and Compliance - General Cross Sectoral Dec 2019

Domestic

Resilience in the face of changing winds - Michael Hodson, Director of Asset Management and Investment Banking

In a speech delivered at EY Funds Forum 2019, Michael Hodson, Director of Asset Management and Investment Banking stated the CBI will continue to adapt and evolve to keep pace with industry and to ensure it can continue to fulfil its mandate of investor protection, market integrity and financial stability. In summary, Mr Hodson stated the CBI's supervision work will continue in 2020 across a number of areas including but not limited to:

  • a focus on liquidity risk and leverage in the non-banking sector both of which remain important issues on our agenda
  • the engagement meetings and full risk assessments that supervised entities have come to expect in line with a risk-based approach to supervision
  • the conclusion of the thematic review on fund management company effectiveness
  • further consultation work on errors in investment funds

Proposed amendment of the Criminal Justice (Money Laundering and Terrorist Financing) Act 2010 in order to establish a cross-border agency to investigate and report on criminal activity in Northern Ireland and this jurisdiction.

The Bill seeks to establish a cross-border crime agency for anti-money laundering practice and terrorist financing between Northern Ireland and this jurisdiction. Currently the Bill is at stage one in Dáil Éireann.

TIBER – Ireland: National Guide published by the CBI to give guidance on how the Central Bank will implement TIBER-IE at a national level

The CBI has published a national guide setting out its implementation of the Threat Intelligence-based Ethical Red-Teaming (TIBER-EU) Framework. The TIBER Framework was published by the ECB in March 2018 and its objective is to put in place a programme to test and improve resilience of financial infrastructure and institutions, at both national and European levels, against sophisticated cyber-attacks. TIBER-EU is designed to deliver a controlled, bespoke intelligence-led Red Team test (or 'ethical hacking') of financial infrastructure and institutions' critical live production systems to mimic real-life threats. Participation in TIBER-IE is voluntary, therefore the framework does not constitute a regulatory requirement.

European

Clearing houses: EU Council adopts position on recovery and resolution

EU ambassadors have approved the Council's position on a proposed framework for clearing houses and their authorities to prepare for and deal with financial difficulties and have invited the presidency to start negotiations with the European Parliament as soon as possible. The proposed rules aim to provide national authorities with adequate tools to manage crises and failures of central counterparties (CCPs). The main objectives of the reform are to preserve clearing houses' critical functions, to maintain financial stability, and to prevent taxpayers from bearing the costs associated with the restructuring and the resolution of failing clearing houses. It provides for close coordination between national authorities in the framework of "resolution colleges" in order to ensure that resolution actions are applied in a coherent manner taking into consideration the impact on affected stakeholders and financial stability.

Capital markets union: EU Council sets objectives for the deepening of the project

The Council adopted conclusions on the deepening of the capital markets union (CMU). The conclusions set out five main objectives for deepening the CMU, namely:

  • enhanced access to finance for EU businesses, especially SMEs
  • removal of structural and legal barriers for increased cross border capital flows
  • provide incentive and remove obstacles for well-informed retail savers to invest
  • support the transition to sustainable economies
  • embrace technological progress and digitalization
  • strengthen global competitiveness

Based on these overarching principles, the conclusions invite the European Commission to assess and explore a list of possible further detailed measures and actions that could help to establish these objectives in practice.

Money laundering: EU Council sets strategic priorities for further reforms

The European Council has adopted conclusions on strategic priorities on anti-money laundering and countering the financing of terrorism (AML). In this context, the Council urges for the swift transposition of all AML legislation into national law and for the strengthening of their effective implementation. The Council also invited the European Commission to explore possible further actions to enhance the existing AML rules, in particular by considering:

  • ways of ensuring a more robust and effective cooperation between the relevant authorities and bodies involved in anti-money laundering and terrorist financing, including through addressing impediments on exchange of information between them
  • whether some aspects could be better addressed through a regulation
  • possibilities, advantages and disadvantages of conferring certain supervisory responsibilities and powers to an EU body

EBA pushes for early action on sustainable finance

The European Banking Authority (EBA) has published its action plan on sustainable finance outlining its approach and timeline for delivering mandates related to environmental, social and governance (ESG) factors. The action plan aims to communicate key messages on the EBA’s policy direction and the expectations from financial institutions on areas where action is needed now to support the move towards more sustainable finance in the EU.

ESAs transform the way competent authorities cooperate with each other on AML/CFT matters

The three European Supervisory Authorities (EBA, EIOPA and ESMA - ESAs) have published joint guidelines on cooperation and information exchange, establishing colleges of anti-money laundering and countering the financing of terrorism (AML/CFT) supervisors for the first time in the EU to ensure effective cooperation and information exchange between competent authorities. The guidelines require that in situations where a firm operates in more than three Member States, supervisors establish an AML/CFT college of AML/CFT supervisors of the same firm, as well as other relevant parties, for example prudential supervisors and AML/CFT supervisors from third countries. This is to ensure that all supervisors have access to comprehensive information about the firm and allow the supervisors to agree on a common approach, including coordinated actions. The guidelines also include provisions to structure supervisory cooperation in situations where the conditions for setting up an AML/CFT college are not met.

Capital markets union: Presidency and Parliament reach preliminary agreement on rules for crowdfunding platforms

Finland's presidency of the Council and the European Parliament reached a political agreement on a new framework which makes it easier for crowdfunding platforms to provide their services across the EU. Following finalisation of technical work, the deal will be submitted for endorsement by EU ambassadors. The new rules will remove barriers for these platforms to operate cross-border by harmonising the minimum requirements when operating in their home market and other EU countries. They are intended to increase legal certainty through common investor protection rules. Parliament and Council will be invited to adopt the proposed regulation at pursuant to Article 294(7) TFEU, once agreed.

Financial supervision: EU Council adopts a review of the supervisory framework for financial institutions

The Council has adopted a first fundamental review of the functioning of the European system of financial supervision (ESFS), which includes three ESAs (EBA, EIOPA, ESMA), and the European systemic risk board (ESRB) which oversees the financial system as a whole and coordinates EU policies for financial stability. The texts adopted by the Council will review tasks, powers, governance and funding of the ESAs and the ESRB, so as to adapt the authorities to the changed context in which they operate. The reform also includes provisions reinforcing the role of the EBA as regards risks posed to the financial sector by money laundering activities.

The Mobile Initiated SEPA (Instant) Credit Transfer Interoperability Guidance is published

The European Payments Council has published a guidance document on Mobile Initiated SEPA (Instant) Credit Transfer Interoperability. The guidance aims to provide an insight into the main issues related to the initiation of (instant) SEPA credit transfers in different mobile payment contexts such as person-to-person, consumer-to-business (retail payments including both in-store and m-commerce payments) and business-to-business payments.

Note by the ECB for the Economic and Financial Affairs Council (Ecofin) on the retail payment landscape

The European Central Bank (ECB) has published a note for the Economic and Financial Affairs Council (Ecofin) on the retail payment landscape. The note states that in light of technological innovations transforming the European retail payment landscape, the ECB finds that the time has come to provide new impetus to European retail payments, building on past achievements such as the Single Euro Payments Area (SEPA). This impetus should be led by the industry, with support from the public sector where needed, mainly through the provision of core infrastructures and an adequate regulatory and oversight framework.

For more information on this topic please contact any member of A&L Goodbody's Financial Regulation team.

Date published: 13 January 2020