Financial Services Regulatory Update – April 2020 Round Up


Benchmark Regulation 2016/1011 (“BMR”) – Disclosures

EU Regulation 2019/2089 on Climate Transition Benchmarks, EU Paris-aligned Benchmarks and sustainability-related disclosures for benchmarks (the Low-Carbon Regulation), which amended the BMR, created two new categories of benchmark under the BMR – Climate Transition Benchmarks (CTBs) and Paris-aligned Benchmarks (PABs).  It also mandated various sustainability-related disclosures for benchmark administrators, with regard to both benchmark methodologies and benchmark statements.

On 9 April 2020, the European Commission published three draft delegated acts setting out:

  • details of the minimum content to be included in the disclosure of how ESG factors are reflected in a benchmark's methodology (here);
  • details of information to be disclosed in a benchmark statement of how ESG factors are reflected in the relevant benchmark(s)(here); and
  • rules on the minimum requirements for a benchmark to be labelled as a CTB or a PAB, and transparency requirements for these benchmarks' methodologies (here).

Consultation on the draft acts closed on 6 May 2020. Once adopted by the European Commission, the acts will be subject to scrutiny by the European Parliament and the Council and will enter into force after being published in the EU’s Official Journal.

BMR – Benchmark Administrators

The BMR mandates various environmental, social and governance (“ESG”) related disclosures for benchmark administrators, which were due to apply from 30 April 2020.  While the European Commission published the draft delegated acts setting out the details of those disclosures on 9 April, these have not yet been adopted (see above). Consequently, on 29 April 2020, ESMA published (here):

  • a No Action Letter stating that national competent authorities should not prioritise supervisory or enforcement action against administrators regarding these new ESG disclosure requirements until the Delegated Regulations apply; and
  • an Opinion addressed to the European Commission stating that any delay in the adoption of the Delegated Regulations should be avoided.

BMR – Memorandum of Understanding (“MoU”)

Last July, the European Commission adopted an equivalence decision recognising that the administrators of certain interest rates and foreign exchange benchmarks in Singapore are subject to legally binding requirements that are equivalent to the EU requirements set out under the BMR.

ESMA has now published an MoU with the Monetary Authority of Singapore setting out co-operation arrangements relating to specific benchmarks in Singapore (here). According to a related press release, the MoU and the equivalence decision will allow financial institutions in the EU to continue using, as reference rates in their contracts, both SIBOR and the Singapore Dollar Swap Offer Rate (SOR), which are financial benchmarks regulated in Singapore.

Capital Requirements Regulation

The EBA published its Opinion in response to the European Commission’s intention to amend the EBA’s final draft regulatory technical standards (“RTS”) on assigning risk weights to specialised lending exposures (here). According to the Opinion, the Commission’s amendments do not alter the draft RTS in a significant manner. The RTS will apply from one year after their publication in the EU’s Official Journal.

Central Securities Depositories Regulation 909/2014 (“CSDR”)

Article 6(2) CSDR focuses on the preparation of the settlement process in order to limit the number of settlement fails. On 6 April 2020, ESMA published the official translations of its Guidelines on standardised procedures and messaging protocols (here), which set out how an investment firm should ensure that it complies with requirements set out in Article 6(2) CSDR, as further specified in Article 2 of Commission Delegated Regulation 2018/1229. National competent authorities must notify ESMA whether they comply or intend to comply with the Guidelines, within two months of the date of publication by ESMA of the Guidelines in all EU official languages.


COVID-19 dominated much of the month of April, with regulators taking a variety of measures relevant to regulated financial service providers. A number of these are summarised in the following briefings:

  • COVID-19: Financial Services Round-Up for 30 March – 5 April 2020 (here);
  • COVID-19: Financial Services Round-Up for 6–19 April 2020 (here);
  • COVID-19: Financial Services Round-Up for 20 – 26 April 2020 (here);
  • COVID-19: Financial Services Round-Up for 27 April – 3 May 2020 (here).

The McCann FitzGerald website has a dedicated COVID-19 section containing FAQs, briefings and guidance on a range of legal and business issues that may need to be addressed (here). 

Derivatives -  LIBOR

ISDA published a statement on the preliminary results of its consultation on pre-cessation fallbacks for derivatives referencing LIBOR (here).  While the results are subject to further analysis, ISDA currently expects to move forward on the basis that pre-cessation fallbacks based on a ‘non-representativeness’ determination and permanent cessation fallbacks would apply to all new and legacy derivatives referencing LIBOR that incorporate the amended 2006 ISDA Definitions. The updated definitions for other covered interbank offered rates (IBORs) will continue to include permanent cessation fallbacks only.

EMIR - Pension Scheme Arrangements

On 2 April 2020, ESMA published its first report documenting the progress made towards achieving clearing solutions for pension scheme arrangements (here). The Report also launches a public questionnaire set out in its Annex 2. For more information, see our briefing here.

Financial Crime

On 17 April 2020, the Wolfsberg Group published updated versions of the following (here):

  • Correspondent banking due diligence questionnaire (CBDDQ) (version 1.3). The changes to the CBDQQ have been incremental and are focused on improving its ease of use and readability. 
  • Financial crime compliance questionnaire (FCCQ) (version 1.1).
  • Completion guidance to help firms complete the CBDDQ.
  • FAQs on the CBDDQ and the FCCQ (version 2.0).
  • Glossary to provide additional context to the CBDDQ and add clarification to certain terms based on industry feedback.

In a related press release, the Wolfsberg Group calls upon the banking industry and supervisors to continue the acceleration of the adoption of the CBDDQ as the standard for higher risk correspondent banking activity.  It notes that the industry is transitioning away from the Wolfsberg AML questionnaire and respondent banks may expect to find that that will no longer be deemed sufficient by their correspondents.

Financial Services and Pensions Ombudsman – Overview of Complaints 2019

The Financial Services and Pensions Ombudsman (FSPO) published its annual Overview of Complaints in 2019, at the end of March (here).  According to the Overview, of the 4,969 eligible complaints received in 2019, 58% related to banking products, 33% related to insurance, 5% related to investment products and the remaining 4% concerned complaints about pension schemes.

Investment Funds – Industry Communication

The CBI published an industry communication on funds preparation with regard to interest rate benchmark reforms (here).  The purpose of this communication is to remind those responsible for the management of investment funds of their obligations to adequately prepare for the implementation of global benchmark reforms and any associated risks.

Investment Funds – Money Market Funds Regulation 2017/1131 (“MMFR”)

The CBI published a notice of intention (the “Notice”) in relation to the application of the ESMA Guidelines on stress test scenarios under the MMFR (here). According to the Notice the CBI expects full compliance with those Guidelines from 4 May 2020. The CBI will, in due course, consult on the incorporation of a provision in the Central Bank UCITS Regulations and AIF Rulebook that all managers of MMFs adhere to the Guidelines.

Investment Funds – Performance Fees

ESMA published its final Guidelines on performance fees in UCITS and certain types of retail AIFs, which are intended to harmonise the way fund managers charge performance fees to such funds, as well as the circumstances in which performance fees can be paid. The Guidelines will apply from two months after the date they are published on ESMA’s website in all EU official languages.  See our related briefing here.

MiFID II – Commodity Derivatives Markets

ESMA published a review report on the impact of the application of position limits and position management positions on commodity derivatives markets (here). The Report covers the impact of the application of position limits and position management on liquidity, market abuse and orderly pricing and settlement conditions in commodity derivatives markets.  It is expected to feed into a report from the European Commission to the European Parliament and the Council.

ESMA also published its Final Report on Technical Advice to the European Commission on the weekly aggregated position reports under MiFID II (here).

MiFID II – Inducements, Costs and Charges

On 1 April 2020, ESMA published its Final Technical Advice to the European Commission on the impact of the inducements and costs and charges disclosure requirements under MiFID II (here).  The report also covers trading by telephone, the provision of information to clients in a durable medium and the possibility to create new categories of clients. In the advice, ESMA:

  • encourages the European Commission to undertake further analysis of inducements;
  • proposes some changes to the inducement regime which are aimed at improving clients’ understanding of inducements; 
  • advises that some disclosure obligations vis-à-vis eligible counterparties and professional investors should be scaled back.

Retail Investment Products

ESMA published its second annual statistical report on the cost and performance of retail investment products in the European Union (here). The report aims at facilitating increased participation of retail investors in capital markets by providing consistent EU-wide information on cost and performance of retail investment products.

Single Resolution Board

On 1 April 2020, the Single Resolution Board (“SRB”) published its Expectations for Banks document, together with a related press release (here). The document sets out the SRB’s views on best practice on key aspects of resolvability.  It covers:

  • General issues;
  • Seven "dimensions" of resolvability, including governance, loss absorbing and recapitalisation capacity and separability and restructuring; and
  • Dialogues between banks and the SRB's internal resolution teams on identified impediments to resolvability and the formal procedure for removing substantive impediments.

Solvency II - Remuneration

EIOPA published an Opinion on the supervision of remuneration principles in the insurance and reinsurance sector (here), which addresses how to achieve consistent supervisory practices in the application of the remuneration principles contained in the Solvency II Delegated Regulation.  The focus of the Opinion is on staff who are identified as potential higher profile risk-takers.  EIOPA will start monitoring the application of the Opinion in two years' time.

Sustainable Finance – International Developments

The International Organization of Securities Commissions (“IOSCO”) published a report on sustainable finance and the role of securities regulators and IOSCO (here).  The report provides an overview of current regulatory and industry initiatives relating to sustainable finance. It provides a detailed analysis of the most relevant international initiatives relating to environmental, social and governance (ESG) and third-party frameworks and standards.  IOSCO also identifies various recurrent issues where improvements need to be made.

The Basel Committee on Banking Supervision published a report on its members’ current regulatory and supervisory initiatives on climate-related financial risks (here).  The report has been produced by the high-level Task Force on Climate-related Financial Risks which the BCBS established recently.  The report summarises the main results of a survey carried out by the Task Force before the COVID-19 outbreak.

Sustainable Finance – Proposed Regulation on Sustainable Investment

On 24 April 2020, the European Commission published a communication to the European Parliament concerning the position of the Council of the EU on the adoption of the proposed Regulation on the establishment of a framework to facilitate sustainable investment (here). The Communication provides details of the political agreement reached between the European Parliament and Council of the EU in December 2019. In particular, the Communication outlines the changes that deviate from the Commission’s initial proposal. The next step is for the Parliament to adopt the Regulation at second reading before it can be published in the EU’s Official Journal.

Selected Consultations/Discussion Papers Published

  • European Commission – Consultation on a renewed sustainable finance strategy (here).  The closing date is 15 July 2020.
  • European Commission – Consultation on a new Digital Finance Strategy for Europe (here).  The closing date is 26 June 2020.
  • European Commission – Consultation on Retail Payments Strategy for the EU (here).  The closing date is 26 June 2020.
  • European Commission - Consultation on draft implementing decision on the equivalence of the legal and supervisory framework applicable to benchmarks in Japan in accordance with the Benchmark Regulation (here).  The closing date was 4 May 2020.
  • European Supervisory Authorities – Consultation on draft regulatory technical standards with regard to the content, methodologies and presentation of disclosures pursuant to Article 2a, Article 4(6) and (7), Article 8(3), Article 9(5), Article 10(2) and Article 11(4) of Regulation (EU) 2019/2088 (here).  The closing date is 1 September 2020.
  • Financial Stability Board - Consultation on toolkit of effective practices for cyber incident response and recovery (here).  The closing date is 20 July 2020.
  • Financial Stability Board – Consultation on global stablecoin arrangements (here).  The closing date is 15 July 2020.

You may also be interested in---

McCann FitzGerald regularly publishes briefings on topics relevant to financial services regulation, among others. In addition to our wide range of briefings relating to COVID-19, referenced above, you may also be interested in the following briefings:

  • SRD II – Shareholder ‘Say on Pay’ Now Mandatory in Ireland (here)
  • SRD II Transposed into Irish Law - Are you ready? (here)
  • ESMA Publishes Final Guidance on Performance Fees (here)
  • Financial Services Regulatory Update – March 2020 Round Up (here)
  • Recent Barclays Acquittals and the Identification Doctrine; is it now time to implement Irish Law Reform Commission proposals? (here)
  • Asset Seizure Regimes and Unexplained Wealth Orders: How do Recent Developments Affect the CAB? (here)
  • Asset Managers and Cybersecurity Risk Management Practices – Central Bank Update (here)
  • EMIR Refit – New Reporting Requirements Coming Soon! (here)

This document has been prepared by McCann FitzGerald LLP for general guidance only and should not be regarded as a substitute for professional advice. Such advice should always be taken before acting on any of the matters discussed.