Financial Services Regulation and Compliance - General Cross Sectoral Dec 2020

DOMESTIC

Opening Statement by Deputy Governor Ed Sibley at Joint Oireachtas Committee on Finance, Public Expenditure and Reform, and Taoiseach

Deputy Governor of the CBI, Ed Sibley, recently delivered a statement to the Joint Oireachtas Committee on Finance, Public Expenditure and Reform in which he highlighted several current areas of focus for the CBI.

 These focus areas include:

  • ensuring that suitable supports are in place to help borrowers affected by income shocks caused by the pandemic and that lenders continue to seek to sustainably resolve borrowers' long term distress
  • safeguarding financial stability, including in seeking to ensure that the banking system operates in a safe, sound and sustainably way
  • ensuring that banks continue meet the CBI's standards for protecting consumers
  • continuing to work to mitigate the risks posed by the UK's departure from the EU 

Mr Sibley also addressed the topic of culture, noting that the CBI expects to see boards taking responsibility for the culture of their firms by overseeing product development, promoting diversity and inclusion at all levels to improve decision-making, and ensuring robust internal systems are in place to drive effective cultures. Mr Sibley commented that where this does not occur the CBI will take appropriate supervisory and/or enforcement action. 

Mr Sibley also noted that the CBI is seeking to strengthen its regulatory framework, pointing to the proposed Individual Accountability Framework. 

Central Bank publishes 'Dear CEO' letter to Schedule 2 firms on low level of compliance with Anti-Money Laundering and Counter Financing of Terrorism obligations

The CBI has published the outcome of supervisory engagements undertaken to assess the compliance of Schedule 2 Firms with their obligations under the Criminal Justice (Money Laundering and Terrorist Financing) Act 2010. 

In the "Dear CEO" letter, the CBI identifies a number of failings across Schedule 2 firms, including:

  • a failure by firms to demonstrate that boards had taken responsibility for the implementation and ongoing oversight of anti-money laundering / counter financing of terrorism (AML/CFT) and financial sanctions (FS) requirements
  • a lack of ongoing assessment and documentation of ML/TF risks specific to each firm's consumers and business activities
  • a failure to put in place and implement firm-specific AML/CFT and FS policies and procedures and a failure to review and update these on an ongoing basis

The Central Bank's Director on Enforcement & Anti-Money Laundering, Seána Cunningham said that it was the responsibility of the boards of Schedule 2 firms to ensure that necessary AML/CFT governance, risk assessment, policies and procedures, training and awareness are in place.   

EUROPEAN

ESAs highlight the change in status of the Simple, Transparent and Standardised securitisation transactions at the end of the UK transition period

The European Supervisory Authorities (the EBA, ESMA and EIOPA, the ESAs) have issued a statement highlighting the change of status of 'Simple, Transparent and Standardised' (STS) securitisation transactions after the end of the Brexit transition period on 31 December 2020. The statement notes that to qualify as an STS securitisation, the Securitisation Regulation requires the originator, sponsor and the securitisation special purpose vehicle (SSPE) to be established in the European Union. The statement notes that where one or all of the securitisation parties is established in the UK following the end of the transition period, that securitisation will lose STS status.  

EU agrees to rules to make it easier for firms to raise capital through the ‘EU Recovery Prospectus'

The European Commission has welcomed the agreement reached by the European Parliament and Council on amendments to the Prospectus Regulation, as part of the Capital Markets Recovery Package. The new rules will introduce a simplified prospectus, known as the 'EU Recovery Prospectus' for well-known companies with a track record in the public market. The new rules have been introduced in an effort to facilitate the recapitalisation of companies affected by the economic shock caused by COVID-19. It is envisaged that the new rules will cut the length of prospectuses from hundreds of pages to just 30 pages. 

Speech - Fabio Panetta: Keeping cyber risk at bay: our individual and joint responsibility

Fabio Panetta, member of the ECB's executive board, delivered a speech in which he discussed the importance of cyber resilience in the financial sector. Mr Panetta commented that the safeguarding of cyber-resilience in the EU should be based on the following 3 lines of defence: regulation and oversight, cyber resilience testing, and intelligence sharing. 

In the area of regulation and oversight, Mr Panetta noted that the European Commission had recently launched its proposal for a Digital Operational Resilience Act (DORA), which, amongst other things, will cover the Eurosystem's cyber resilience oversight expectations. In the area of cyber resilience testing, Mr Panetta pointed to the development of the TIBER-EU testing framework, which is currently implemented in 10 European countries. Mr Panetta also highlighted the launch of the European Cyber Resilience Board's 'Cyber Information and Intelligence Sharing Initiative', which aims to foster collaboration and intelligence sharing to combat cybersecurity threats

EBA explains how it will use its new power to carry out risk assessments in the fight against money laundering and terrorist financing

The EBA has published its methodology for carrying out risk assessments under Article 9a of the revised EBA Regulation, as part of the EBA's new role to lead, coordinate and monitor the fight against money laundering and terrorist financing (ML/TF) in all EU Member States. The methodology sets out how the EBA will identify emerging ML/TF risks and carry out risk assessments of how well-equipped national competent authorities are to tackle emerging ML/TF risks. 

Capital Markets Recovery Package: European Council confirms targeted amendments to EU capital market rules

The European Council has endorsed targeted amendments to EU capital market rules to support economic recovery from the COVID-19 crisis. The legislative changes include amendments to MiFID II, the Prospectus Regulation and the EU securitisation framework. The European Parliament and the Council will now be called on to formally adopt the amendments by February 2021.

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

Date published: 7 January 2021