Financial Services Regulation and Compliance - General Cross Sectoral May 2022

DOMESTIC

Addendum to the Consumer Protection Code 2012

On 16 May 2022, the CBI published the addendum to the Consumer Protection Code 2012 (CPC). The addendum extends the scope of the CPC to include providers of hire purchase, consumer hire and/or buy-now-pay-later agreements (the regulated entities). The regulated entities will be subject to Chapters 2, 5 and 9 of the CPC. The addendum is effective from 16 August 2022.  

Addendum to the Minimum Competency Code 2017

On 13 May 2022, the CBI published the addendum to the Minimum Competency Code 2017 (MCC). The addendum provides for transitional arrangements for persons carrying out the new retail credit firm/ credit servicing firm (RCF/CSF) activities, includes the definition of a new RCF/CSF activity and includes the direct/ indirect provision of credit, entering into a hire-purchase agreement or consumer-hire agreement to which the Central Bank Act 1997 applies the definition of 'consumer credit' at Appendix 1.

Commencement of Consumer Protection (Regulation of Retail Credit and Credit Servicing Firms) Act 2022

On 13 May 2022, the Consumer Protection (Regulation of Retail Credit and Credit Servicing Firms) Act 2022 (Commencement) Order 2022 was published in the Iris Oifigiúil. The order provides the Consumer Protection (Regulation of Retail Credit and Credit Servicing Firms) Act 2022 comes into operation on 16 May 2022.

Updated guidance note on completing an application for authorisation as a retail credit firm

On 13 May 2022, the CBI updated its guidance on completing an application for authorisation as a retail credit firm under Part V of the Central Bank Act 1997 to reflect the changes introduced by the Consumer Protection (Regulation of Retail Credit and Credit Servicing Firms) Act 2022.

CBI publishes PCF In-situ return guidance on amendments to the list of PCFs

On 10 May 2022, the CBI published the PCF in-situ return guidance on amendments to the list of pre-approval controlled functions (PCFs). The guidance sets out how registered financial services providers (RFSPs) can notify the CBI of the individuals who were in-situ in the following PCF roles as at 05 April 2022:

  • PCF-2B (Office of Independent Non-Executive Director)
  • PCF-12 (Head of Compliance)
  • PCF-16 (Branch managers of branches outside the State)
  • PCF-52 (Head of Anti-Money Laundering and Counter Terrorist Financing Compliance)

The PCF in-situ return will be available via the CBI online reporting system from 18 May 2022 and relevant RFSPs must submit their returns by 30 June 2022.

EUROPEAN

ECB opinion on AMLR1 and AMLD6

On 25 May 2022, the European Central Bank (ECB) published its opinion on a proposal for a directive (AMLD6) and a regulation (AMLR1) on the prevention of the use of the financial system for the purposes of money laundering or terrorist financing. The ECB welcomes this initiative to strengthen the Union's rules concerning anti-money laundering and countering the financing of terrorism. The ECB made specific observations on the definition of obliged entities, aspects of prudential supervisory, limits to payments in cash, risk factors for customer due diligence and the definition of crypto-assets.  

EPC guidance on improve transparency for retail payment end-users

On 25 May 2022, the European Payments Council (EPC) published a guidance document on improving transparency for retail payment end-users. The guidance document makes recommendations on how to improve the accuracy of data elements related to "whom", "where" and "when" a payment was made. The guidance document also considers existing SEPA payment scheme rulebook datasets and attributes that can be used to transport and display the "whom", "where" and/or "when" information in SCT, SCT Inst and SDD Core transactions.

ESMA encourages crowdfunding service providers to accelerate their transition to the new regime

On 19 May 2022, ESMA published its final report on the relevance of extending the transitional period set out in Article 48 of the Crowdfunding Regulation (CR). Currently, crowdfunding service providers (CSPs) that provide their services on a national basis only (the national CSPs) benefit from a transitional period that is set to expire on 1 October 2022. In the report, ESMA expressed concerns with the potentially detrimental consequence an absence of extension of the transitional period could have on some national crowdfunding market. ESMA also noted the investor protection and convergence concerns that may arise from the extension of the transitional period.

To avoid any extension unnecessarily delaying the transition to the CR, ESMA suggested to the European Commission to explore the possibility of applying the extension to national CSPs which have duly applied for authorisation prior to 1 October 2022. ESMA strongly encourages CSPs to accelerate their transition to the regime deriving from CR by filing relevant applications to their national competent authority as soon as possible.

EBA publishes final technical standards on crowdfunding service providers

On 13 May 2022, EBA published its final draft regulatory technical standards (RTS) on credit scoring and pricing disclosure, credit risk assessment and risk management requirements for crowdfunding service providers (CSPs). The final draft RTS specifies:

  • the information that CSPs shall provide to investors on the calculation of credit scores and prices of crowdfunding offers
  • a minimum set of common standards with regards to information to be considered in credit risk assessment and loan valuation
  • the underlying policies and governance arrangements

The final draft RTS will be submitted to the Commission for endorsement before being published in the Official Journal of the European Union.

Digital Finance: Provisional agreement reached on DORA

On 10 May 2022, the Council and the European Parliament reached a provisional agreement on the Digital Operational Resilience Act (DORA). DORA sets uniform requirements for the security of network and information systems of companies and organisations operating in the financial sector as well as critical third parties which provide ICT-related services to them, such as cloud platforms or data analytics services. The provisional agreement reached is subject to approval by the Council and the European Parliament before going through the formal adoption procedure.

Distance marketing of consumer financial services – review of EU rules

On 11 May 2022, the European Commission adopted a proposal amending rules concerning financial services contracts concluded at a distance. The proposal will strengthen consumer rights and foster the cross-border provision of financial services in the single market. The proposal introduces actions across several areas:

  • Easier access to 14-day withdrawal right: traders will have to provide a withdrawal button when selling through electronic means and send a notification of the right of withdrawal if the pre-contractual information is received less than a day before conclusion of the contract.
  • Provision of pre-contractual information: obligations are imposed on the seller to provide certain information upfront, display the information prominently, and comply with the rules regarding the use of pop-ups or layered links to provide information.
  • Protection of consumers when concluding financial services contract online: traders will be obliged to set up online systems which are fair and transparent and to provide an adequate explanation when using online tools (e.g. roboadvice or chat boxes). Consumers will also have the option to request human intervention, if the interaction with such online tools is not fully satisfactory.
  • Enforcement: stronger penalties will apply to financial service contracts concluded at a distance in case of widespread cross-border infringements, with a maximum penalty of at least 4% of annual turnover.
  • Full harmonisation to ensure the same high level of consumer protection across the internal market.

The proposal is open for feedback from 13 May 2022 until 8 July 2022.

European Commission launches public consultation on payment services – review of EU rules

On 10 May 2022, the European Commission (EC) launched a joint public consultation on the revised Payment Services Directive (PSD2) and the open finance framework. The consultation will gather evidence on the application and impact of the PSD2, and on the view on open finance, taking into consideration, among others, developments in the payment market, payment user needs and the need for possible amendments. The consultation will run until 2 August 2022.

The EC launched separate targeted consultations on the review of PSD2 and on open finance framework and data sharing in the financial sector. The targeted consultations will run until 5 July 2022.

The EC also published a call for evidence for an impact assessment on the open finance framework on enabling data sharing and third party access in the financial sector. The call for evidence is open until 7 June 2022.

EBA provides its advice to the European Commission on non-bank lending

On 4 May 2022, the EBA published a report on non-bank lending in response to the EC's February 2021 call for advice on this topic. The EBA’s proposals aim at addressing risks arising from the provision of lending by non-bank entities in the areas of supervision, consumer protection, anti-money laundering and countering the financing of terrorism (AML/CFT), macro and microprudential risks.

The report found non-bank lending remains largely unharmonised across the EU. The report identified the risks related to provisions of credit by non-bank lenders and put forward some proposals to address them. In particular, the report highlights the importance of:

  • ensuring that the consumer protection framework remains fit-for purpose in view of new players entering the market
  • strengthening the provisions in terms of authorisation and admission to activities and clarifying the identification of prudential perimeter and the supervisory responsibilities in cross-border provision of services, to allow for a more effective oversight
  • covering all non-bank lenders in a more comprehensive way in the EU-wide AML/CTF framework, to achieve greater harmonisation and capture such entities as 'obliged entities'
  • enhancing the monitoring and reporting frameworks to avoid that any sudden increase of macroprudential risks remain unaddressed and considering the introduction of activity-based macro-prudential measures to cover all credit providers

Sanctions imposed in response to the crisis in the Ukraine

Since February, the EU imposed a number of sanctions in response to the crisis in the Ukraine. Given that the crisis is developing and sanctions are continuing to evolve, the CBI is publishing details of new restrictive measures/sanctions that are adopted in this regard, as well as any associated EU/UN guidance, on their dedicated webpage.

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

Date published: 14 June 2022