Financial Services Regulation and Compliance – Banking June 2022

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Domestic

Statement from BPFI after the CEO Roundtable

On June 29, 2022, the CBI welcomed the statement from the Banking and Payments Federation Ireland (BPFI) following the CEO Roundtable. During the meeting, the retail banks presented the work program undertaken by sector to manage the migration of personal and professional bank accounts. Key areas identified for further work include:

  • better planning – providing strategic direction and operational capability oversight, focused on analyzing key industry-level data metrics, so that expected increases in customer activity and emerging issues can be addressed
  • customer support as needed – targeted interaction for customers needing additional assistance
  • proactive communication – the rollout of an awareness and information campaign launched in July aimed at providing comprehensive advice, support and practical tools to customers who need to move their banking services
  • system-wide engagement – stakeholder engagement, including through a dedicated customer transition working group established under the auspices of the BPFI, with other sectors and their representatives, including those who are also required to respond on behalf of their own clients

The CBI stressed that it expects a strong customer-centric approach from the retail banking industry. The CBI will continue to proactively engage with the sector as these plans are implemented and stands ready to intervene further if the exercise does not go according to the CBI’s expectations.

CBI calls on businesses to prevent IBAN discrimination

On June 17, 2022, the CBI issued a press release reminding all businesses of their obligations under the Single European Payments Area initiative (SEPA). SEPA regulations prohibit the refusal to accept non-Irish IBANs in the SEPA area. The CBI reminds providers and facilitators of SEPA Credit Transfer and Direct Debit services of their obligations under SEPA. Businesses should take all necessary steps to fully comply with SEPA regulations, thus preventing cases of IBAN discrimination from occurring from the outset.

CBI framework for macroprudential capital

On June 14, 2022, the CBI published its updated strategy for macroprudential capital buffers. The paper reviews the CBI’s strategy for the use of macroprudential capital buffers, the updated strategy for the countercyclical capital buffer (CCyB) and other systemically important institutions (O-SIIs) buffer strategy.

Key findings from the CBI’s review of its macroprudential capital strategy include:

  1. the CBI updates its strategy for the deployment of macroprudential capital tools, and
  2. when macro-financial risks are neither high nor moderate, the CBI will set a positive CCyB rate

European

ITS on benchmark portfolios, reporting templates and reporting instructions for amended CRD IV reporting

On 30 June 2022, Commission Implementing Regulation 2022/951 amending the Implementing Technical Standards (ITS) set out in Implementing Regulation 2016/2070 as regards reference portfolios, reporting templates and the reporting instructions to be applied in the EU for the reporting referred to in Article 78(2) of the Capital Requirements Directive IV have been published in the Official Journal of the EU. The Commission Implementing Regulation enters into force on July 20, 2022.

ECB opinion on the proposed amendments to the CRD

On 30 June 2022, the ECB published its opinion of 27 April 2022 on the proposed amendment to the CRD with regard to supervisory powers, sanctions, third country branches, environmental, social and governance risks. The opinion addresses issues of particular importance to the ECB, including:

  • environmental, social and governance risks
  • introduction of exit floor
  • the right and appropriate framework
  • third country branch requirements
  • direct provision of banking services in the EU by companies from third countries
  • supervisory powers
  • administrative penalties
  • prudential benchmarking
  • disclosure

On 16 June 2022, the ECB also published its opinion of 24 March 2022 on the proposed changes to the requirements for credit risk, credit valuation adjustment risk, operational risk, market risk and production floor. The opinion provides detailed views on the main elements of the proposal and on the remaining risks that could be insufficiently covered if the EU decides to deviate from the Basel III standards.

EBA responds to the Commission’s call for advice on the revision of the Mortgage Credit Directive

On 23 June 2022, the EBA published an opinion and a report in response to the European Commission’s call for advice on the revision of the Mortgage Credit Directive (MCD). The EBA proposes to review the MCD in order to facilitate the proper functioning of the internal market for mortgage loans, to promote a level playing field for all types of lenders and to ensure a high level of consumer protection in all Member States of the EU. The EBA has identified some specific issues to be addressed. In particular, the EBA suggests:

  • revise pre-contractual and advertising information requirements to provide consumers with the appropriate information to make an informed decision and compare products
  • ensure that information disclosure requirements are suitable for digital channels
  • introduce additional consumer protection measures when artificial intelligence systems are used for credit assessment
  • introduce borrower-centric measures in consumer information to promote responsible lending and borrowing while contributing to financial stability
  • establishing an EU-wide definition of ‘green mortgages’ to encourage sustainable lending and borrowing

RTS on how to determine indirect exposures to a customer

On 28 June 2022, the Commission Delegated Regulation supplementing the Capital Requirements Regulation (CRR) with regard to regulatory technical standards (RTS) specifying how to determine indirect exposures to a customer arising from derivative contracts and credit derivatives where the contract has not been entered into directly with the customer but the underlying debt or equity instrument has been issued by that customer has been published in the official journal of the EU. The Delegated Regulation sets out the requirements for:

  • determining the value of indirect exposure to a customer arising from derivative contracts and credit derivatives
  • allocation of indirect exposures to categories of derivative contracts
  • calculation of the indirect exposure value for options on debt and equity instruments, credit derivative contracts and other derivatives listed in Annex II of CRR
  • calculation of indirect exposure values ​​arising from multi-underlying derivative contracts

The delegated regulation enters into force on July 18, 2022.

Delegated regulation amending the RTS on the calculation of credit risk adjustments under the CRR

On June 21, 2022, Delegated Regulation (EU) 2022/954 amending the RTS provided for by Delegated Regulation (EU) No 183/2014 as regards the specification of the calculation of adjustments for specific and general credit risk under the CRR, was published in the Official Journal of the European Union. The delegated regulation will enter into force on July 11, 2022.

EBA Annual Report 2021

On 15 June 2022, the EBA published its 2021 Annual Report. The report highlighted the EBA’s achievements in 2021 and outlined the EBA’s priorities for 2022. The EBA’s priorities for 2022 include:

  • monitoring and updating of the prudential supervision and resolution framework
  • review and strengthen the EU-wide stress testing framework
  • banking and financial data – strengthening EBA’s analytical capabilities and enhancing market discipline through a Pillar III data platform and integration with the EU Single Access Point
  • digital resilience, fintech and innovation – deepening analysis and information sharing
  • fight against money laundering and terrorist financing and contribute to a new EU infrastructure
  • provide tools to measure and manage ESG risks
  • monitor asset quality developments and assess COVID-19 related regulatory support programs, and maintain COVID-19 reporting and disclosure requirements

Commission adopts two delegated regulations on RTS on market risk

On June 14, 2022, the European Commission adopted two delegated regulations supplementing the CRR with regard to RTS:

  1. specifying the criteria for assessing the modelability of risk factors under the internal models approach and specifying the frequency of such assessment in accordance with Article 325b(3) of CRR
  2. specifying the technical details of the requirements for back-testing and allocation of lost profits under Articles 325b and 325b of CRR

The European Parliament and the Council will now scrutinize the delegated regulations. If neither objects, they will enter into force on the twentieth day following that of their publication in the Official Journal of the EU.

EBA consults on guidelines for resolution authorities on publishing their approach to the application of the bail-in tool

On 7 June 2022, the EBA launched a public consultation on its draft guidelines addressed to resolution authorities for the publication of their approach to implementing the bail-in tool. The guidelines aim to ensure that a minimum level of harmonized information is made public regarding the mechanisms underlying the execution of the bail-in tool. The consultation is open until September 7, 2022. A public hearing on the draft guidelines will take place by conference call on July 19, 2022 from 10 a.m. to 12 p.m.

Sanctions imposed in response to the crisis in Ukraine

Since February, the EU has imposed a number of sanctions in response to the crisis in Ukraine. As the crisis develops and sanctions continue to evolve, the CBI publishes details of new restrictive measures/sanctions that are adopted in this regard, along with any associated EU/UN guidance, on their dedicated website. Web page.

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