Financial Services Regulation and Compliance - General Cross Sectoral Jan 2022

DOMESTIC

CBI announces new Crowdfunding Regulatory Regime

On 13 January 2022, the CBI announced a new regulatory regime for Crowdfunding Service Providers (CSP) under EU Regulations. The CBI is the designated competent authority for crowdfunding regulation in Ireland. The EU Crowdfunding Regulations are directly effective and have applied from 10 November 2021 to investment-based crowdfunding and peer-to-peer lending.

The CBI announcement follows the implementation of the EU Regulations into Irish law by statutory instrument 702/2021 in December 2021.

The new framework will require in-scope crowdfunding service providers to be authorised and they will be subject to operational and prudential requirements as well as investor protection measures. A number of provisions of the Consumer Protection Code 2012 will now apply to advertising by CSPs in Ireland.

CBI announces withdrawal of Policy Statement

On 17 January 2022, the CBI  announced that its ‘Policy Statement – EBA Remuneration Guidelines: The Central Bank of Ireland’s approach to proportionality relating to the pay-out process applicable to variable remuneration’  (the 2017 policy statement) was to be withdrawn. It clarified the Central Bank’s approach to proportionality relating to the pay-out process applicable to variable remuneration for Irish Less Significant Institutions (LSIs) and CRD IV Investment Firms. The 2017 policy statement was withdrawn with immediate effect, in light of amendments introduced under the EU (Capital Requirements) (Amendment) Regulations 2020. The new CBI Policy Statement clarifies exemption thresholds and the circumstances in which the CBI may specify alternative thresholds.

CCPC publishes Merger & Acquisition Report 2021

On 4 January 2022, the Competition and Consumer Protection Commission (CCPC) published its annual merger report. The CCPC is the statutory body responsible for promoting compliance with, and enforcing, competition and consumer protection law generally in Ireland.

The merger report found that 2021 was the busiest year in Irish merger control since 2018, with a total of 81 notifications being made to the CCPC. This is a 98% increase on the 41 merger notifications made in 2020, and a 72% increase on the 47 merger notifications made in 2019. Financial and Insurance Services stood out as a key sector for deals notified in 2021.

"The economic outlook for the year ahead" - Remarks by Governor Makhlouf to the Institute of Directors

On 24 January 2022, the Governor of the CBI, Gabriel Makhlouf, spoke to the Institute of Directors on the developments and outlook for the Irish economy.

Governor Makhlouf noted that the economic outlook for Ireland is positive, with the economy proving to be resilient to the pandemic. Many sectors of the economy expanded strongly towards the end of 2021, and unemployment fell markedly. One of the most striking features to be seen from an Irish perspective is female labour force participation, which now stands at its highest level on record. Additionally, an increased number of younger people are also entering the workforce. These dynamics are supporting the overall positive economic outlook.

On the issue of inflation, Governor Makhlouf stated that the key question is what is driving inflationary dynamics and what can be reasonably expected in the short to medium term. Having reached highs of 5.7% (HICP) in December, inflation across the euro area is expected to remain elevated in the near term. The CBI expects it to remain above 2% for most of this year but forecasts project it to settle below the 2% target in 2023 and 2024. Governor Makhlouf said it is reasonable to expect that current high rates of consumer price inflation will ease later this year, as supply chain issues unwind and energy prices stabilise. The acute pandemic-related effects should dissipate and bottlenecks should fade over time.

In relation to the more long term focus, the Governor noted that the next decade will continue to be characterised by rapid change in our economies and in the financial system, driven by technology, by the need to respond to climate change, by an ageing society, and, perhaps most immediately, by the move to different ways of working. The CBI Strategy, which was published in Q4 2021, instructs how the CBI will navigate these complexities and opportunities.

EUROPEAN

EBA launches consultation on draft Guidelines on remuneration and gender pay gap benchmarking exercise for banks and investment firms

On 21 January 2022, the EBA launched a consultation to update its guidelines on the remuneration benchmarking under the Capital Requirements Directive (CRD). The review integrates additional requirements introduced by CRD V regarding the application of derogations to the requirement to pay out a part of variable remuneration in instruments and under deferral arrangements and the benchmarking of the gender pay gap. In addition, the review also includes guidance on how to harmonise the benchmarking of approvals granted by shareholders to use higher ratios than 100% between the variable and fixed remuneration.

A separate and specific set of guidelines is provided for investment firms under Investment Firms Directive (IFD). The guidelines reflect the changes made to the new remuneration framework for investment firms. The approach taken in the draft guidelines for investment firms is consistent with the corresponding guidelines for banks.

The templates for the data collection have been revised, also taking into account the European Commission’s Implementing Regulation on disclosures.

The principle of equal pay for equal work or work of equal value and measures to ensure equal opportunities have already been included in the EBA Guidelines on sound remuneration policies and internal governance. The benchmarking of the gender pay gap will allow competent authorities to monitor the implementation of such measures and their development at different levels of pay. The guidelines aim at ensuring that the benchmarking of the gender pay gap covers a representative sample of institutions. Specific templates for the benchmarking of the gender pay gap have also been introduced.

The new reporting format is expected to apply for the collection of data in 2023 for the financial year 2022. For the gender pay gap, the first data collection will concern the year 2023.

The consultation runs until 21 March 2022.

EBA launches today 'EuReCA', the EU's central database for anti-money laundering and counter-terrorism financing

On 31 January 2022, the EBA launched its central database for anti-money laundering and counter-terrorist financing (AML/CFT). This European reporting system for material CFT/AML weaknesses, EuReCA, will be central to coordinating efforts by competent authorities and the EBA to prevent and counter money laundering and terrorist financing (ML/TF) risks in the Union.

EuReCA will contain information on material weaknesses in individual financial institutions in the EU that competent authorities have identified. Competent authorities will also be reporting the measures they have imposed on financial institutions to rectify those material weaknesses. Examples of material weaknesses include the lack of adequate AML/CFT policies and procedures including the absence of transaction monitoring at the group level and the absence of policies and procedures for high-risk customers, which increase the ML/TF risk associated with the financial institution.

The EBA will use information from EuReCA to inform its view of ML/TF risks affecting the EU financial sector. It will also share information from EuReCA with competent authorities as appropriate, to support them at all stages of the supervisory process and, in particular, should specific ML/TF risks or trends emerge. In this regard, EuReCA will act as an early warning tool, which help competent authorities to act before ML/TF risk will crystallise.

EuReCA will not start to collect personal data until the draft regulatory technical standards, published 20 December 2021, are approved by the European Commission.

Speech by Christine Lagarde, President of the ECB, at the meeting of the Conference of Parliamentary Committees for Union Affairs of the Parliaments of the European Union

On 14 January 2022, Christine Lagarde, President of the ECB, delivered the introductory statement at a meeting of the Conference of Parliamentary Committees for Union Affairs of the Parliaments of the European Union (COSAC).

In her speech to parliamentarians from across the EU, President Lagarde discussed three key directions for improvement; providing stability, strengthening supply and ensuring strategic autonomy.

• providing stability: President Lagarde highlighted the need for a stabilising monetary policy as the EU navigates its way out of the pandemic. Though she expects the drivers of inflation to ease over the course of the year, Lagarde noted that the ECB is committed to taking any measures necessary to ensure the delivery of the 2% inflation target over the medium term.
• strengthening supply: President Lagarde noted that the green transition, the digital revolution and demographic shifts have all been accelerated by the pandemic. In order to achieve sustainable growth in the future, supply and demand need to move together as the economy adjusts to these changes.
• ensuring strategic autonomy: Strengthening Europe’s strategic autonomy is vital in this context, as the digital realm is a global one where other economies have a head start. Action needs to be taken at a European level on digital issues in order to remain in control of essential economic activities and set the highest standards for EU citizens. The recent legislative initiatives – like the Digital Services Act or the Digital Markets Act – and the “Path to the Digital Decade” presented by the Commission last year will help to secure the EU’s global position in this field and project our standards across the world. Further, the ECB is also doing its share to prepare Europe for the new digital landscape, notably via the digital euro project.

President Lagarde outlined that the joint response to the pandemic has shown what can be achieved when we act together. However, noted there is much still to be done, and we should not let our resolution fade as the urgency of the crisis passes.

The European Commission puts forward declaration on Digital Rights and Principles for everyone in the EU

On 26 January 2022, the European Commission (EC) published their proposal to a set of principles for a human-centred digital transformation. This European Declaration on Digital Rights and Principles (the declaration) sets out shared political intentions to citizens, businesses, public administrations and policy-makers The declaration is closely linked to, and complements the proposal for the “Path to the Digital Decade” which was adopted in September 2021 and sets out the broader digital targets and the path to achieve them.

The aim is to ensure that the values of the Union and the rights and freedoms of individuals as guaranteed by Union law are respected and reinforced both offline and online. Putting people at the centre of the digital transition is a key priority for the European Commission. The digital transformation should be shaped according to European values and laws.

The Declaration will take the form of a joint solemn declaration to be signed by the European Parliament, the Council, and the Commission. The European Parliament and the Council have been invited to discuss the draft declaration, and to endorse it at the highest level by summer 2022.

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

Date published: 11 February 2022