Financial Services Regulatory Update – November 2022 Round Up
| General Updates | |
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Consumer Credit (Amendment) Act 2022 |
On 14 November 2022, the Consumer Credit (Amendment) Act 2022 was commenced by statutory instrument (here). This Act, which regulates the provision of high cost credit, sets a ceiling on interest rates charged by ‘high cost credit providers’, limits the maximum term of a loan agreement and aims to modernise the industry more generally. Further information on this Act is available in our briefing (here). On the same date, the Central Bank of Ireland (“CBI”) published FAQs for high cost credit providers (here) and an information page on their website dedicated to high cost credit providers (here). On 18 November 2022, the Consumer Credit Act 1995 (section 98 A)(Maximum Interest Rates) Regulations 2022 were published Iris Oifigiúil (here). These Regulations set maximum rates of interest chargeable under high cost credit agreements and came into effect on 14 November 2022. |
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CBI ‘Dear CEO’ Letter on Consumer Protection |
On 17 November 2022, the CBI published a ‘Dear CEO’ letter on protecting consumers in a changing economic landscape (here). The letter specifies the actions, as previously set out in the Consumer Protection Outlook Report (here), that the CBI expects regulated firms to take to ensure consumers are protected. The CBI emphasises that regulated firms have a responsibility to navigate the rapidly changing financial services landscape in a manner that places the best interests of consumers at the centre of their commercial decision-making. The CBI notes that, since the publication of the Consumer Protection Outlook Report, a more challenging economic outlook characterised by energy-driven inflation and uncertainty has materialised. The letter emphasises the importance of firms meeting expectations in this evolving context and highlights several areas for attention:
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Retail Banking Review |
On 29 November 2022, the Government published the report of the Retail Banking Review (here). The review, which examined the evolution of the retail banking sector and the current landscape, makes 34 recommendations to be implemented by the Department of Finance, the CBI and the retail banking sector itself. The review spans several core themes and includes, in particular, recommendations that:
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Consumer Rights Act 2022 |
On 7 November 2022, the Consumer Rights Act 2022 was signed into law by the President, following its passage through the Houses of the Oireachtas (here). This Act was commenced (with the exception of section 161) by statutory instrument on 29 November 2022 (here). Under this Act, “service” means any service or facility including financial or other professional services. Therefore, financial service providers have obligations to consumers under this Act, with offences stipulated for breaches. These obligations include that the service be fit for purpose and that the trader has the necessary skill to provide the service with reasonable skill and care. Further detail is available in our briefing (here). |
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DORA |
On 28 November 2022, the Council of the EU (the “Council”) announced (here) that it had adopted the proposals for a Regulation on digital operational resilience for the financial sector (“DORA”) (here) and related amending Directive (here). DORA aims to harmonise and strengthen digital operational resilience requirements for the financial services sector in the EU. DORA will enter into force 20 days after publication in the Official Journal of the European Union (the “Official Journal”) and will apply 24 months after its entry into force, while the Amending Directive must be transposed by Member States within 24 months. |
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Housing Loan Requirements |
On 1 November 2022, the Central Bank (Supervision and Enforcement) Act 2013 (Section 48 (1)) (Housing Loan Requirements) Regulations 2022 were published in Iris Oifigiúil (here). These Regulations were issued by the CBI and set limits for lenders on the proportion of mortgage loans that they may advance in certain categories by reference to the value of the property on which the mortgage loan is secured and the income of the borrower. These Regulations take effect on 1 January 2023. |
| Crowdfunding | |
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CBI Publications |
On 24 November 2022, the CBI updated the crowdfunding industry notice on its website following the extension of the transitional arrangements for existing crowdfunding service providers (here). Additionally, the CBI updated its Q&As for crowdfunding service providers (2nd Edition November 2022) (here). Included in the latest edition are Q&As in relation to (i) the extension of the transitional arrangements and (ii) the applicability of the Addendum to the Consumer Protection Code 2012. |
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RTS and ITS |
On 8 November 2022, several Delegated and Implementing Regulations made under the Regulation on European crowdfunding service providers for business (the “Crowdfunding Regulation”) were published in the Official Journal. The Delegated Regulations containing regulatory technical standards (“RTS”) are:
The Implementing Regulations containing implementing technical standards (“ITS”) are:
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| General ESG/Sustainability | |
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SFDR Q&As |
On 17 November 2022, the European Supervisory Authorities (the “ESAs”) published a ‘Questions and answers (Q&A) on the SFDR Delegated Regulation (Commission Delegated Regulation (EU) 2022/1288)’ (the “Q&As”) (here). The Q&As consider the Sustainable Finance Disclosure Regulation ("SFDR") RTS in the context of several topics, including:
Further detail is available in our briefing (here). |
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Delays to review of SFDR RTS |
On 14 November 2022, the European Securities and Markets Authority (“ESMA”) published a letter (dated 26 October 2022, here) sent by the ESAs to the European Commission (the “Commission”) relating to the timeline for amendments to the SFDR RTS. The Commission had requested that the ESAs produce amendments to the SFDR RTS concerning the indicators for principal adverse impact (“PAI”) and the financial product disclosures by April 2023. However, the ESAs state that it will not be possible to meet that original deadline and therefore they must delay the delivery of these amendments for at least six months, until November 2023. The ESAs attribute the delay to the technical aspects of the amendments and the need to seek input from specialist bodies and agencies. |
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Corporate Sustainability Reporting Directive |
On 10 November 2022, the European Parliament (the “Parliament”) adopted the text of the Corporate Sustainability Reporting Directive (“CSRD”). The Council then announced its adoption of the CSRD on 28 November 2022 (here). The CSRD will replace the current reporting regime under the Non-Financial Reporting Directive (the "NFRD") to introduce more detailed reporting requirements for sustainability issues such as environmental rights, social rights, human rights and governance factors. The CSRD will oblige in scope companies to disclose information on their societal and environmental impact connected with their own operations and with their value chain. The final text of the CSRD includes changes to the Commission’s original proposal, such as easing the burden of obtaining information from other companies in a company’s value chain and providing that sustainability reporting standards applying to in scope SMEs need to be proportionate to their capacity and resources and relevant to the scale and complexity of their activities. See our briefings (here) and (here) with further detail. The CSRD will apply on a phased basis:
The next step is for the CSRD to be signed by the President of the Parliament and the President of the Council, after which it will be published in the Official Journal and will enter into force 20 days afterwards. The CSRD will need to be implemented by Member States 18 months later. |
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Call for Evidence on Greenwashing |
On 15 November 2022, the ESAs published a call for evidence (“CfE”) on better understanding greenwashing (here). The ESAs have invited submissions covering:
The deadline for comments is 10 January 2023. |
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Green Loans and Mortgages |
On 22 November 2022, the European Banking Authority (“EBA”) published a Commission call for advice on green loans and mortgages (here). The Commission notes that green loans have an important role to play in transforming the economy and gives the example of loans which may assist improve the energy performance of buildings, change towards environmentally friendly heating sources for buildings or switch to zero emission vehicles. On this basis, the Commission requests the EBA’s advice on green retail lending. The EBA’s advice should include:
The Commission has requested that the EBA deliver its advice by 29 December 2023. |
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Report on Taxonomy Regulation |
On 28 November 2022, the EU Platform on Sustainable Finance (“PSF”) published a report providing supplementary advice on the methodology and technical screening criteria for the climate and environmental objectives under the EU Taxonomy Regulation (here). This report supplements a March 2022 report and provides an update on work undertaken since then. This report also sets out:
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CSDDD |
On 30 November 2022, the Council published its general approach (that is, its position for negotiations with the Parliament) for the proposed Corporate Sustainability Due Diligence Directive (“CSDDD”) (here). This general approach was adopted by the Council at its 1 December 2022 meeting. The CSDDD will lay down rules on obligations for large companies regarding actual and potential adverse impacts on human rights and the environment, with respect to their own operations, those of their subsidiaries, and those carried out by their business partners in their chain of activities. It also will lay down obligations for companies to adopt a plan ensuring their business model and strategy are compatible with the Paris Agreement on climate. The CSDDD will also specify penalties and civil liability for violating the obligations. |
| Capital Requirements/Credit Institutions | |
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Climate and Environmental Risks |
On 2 November 2022, the European Central Bank (“ECB”) published a report outlining the results of its 2022 thematic review on climate-related and environmental (“C&E”) risks (here). The ECB also published a report containing good practices for C&E risk management observed in banks during the review (here). The findings of the review include:
The ECB did highlight that “the good practices observed in numerous institutions demonstrate how the sector can harness innovation to address the prevailing challenges.” Based on the findings of the review, the ECB has set phased deadlines for banks to meet:
The ECB has also set institution-specific remediation timelines which may deviate from the above due to the particular circumstances of an institution. |
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2023 EBA Stress Test |
On 4 November 2022, the EBA published its 2023 EU-wide stress test methodology and draft templates. The methodological note (here) intends to offer guidance for banks in performing the stress test. The templates (here) and guidance on the templates (here) are to be used for collecting data from banks in relation to their resilience to shocks and their capital position. |
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Proposals for CRR III and CRD VI |
On 8 November 2022, the Council announced (here) that it has agreed its general approach on:
The Council stated that it has added technical improvements to the areas of credit risk, market risk and operational risk. The Council has also introduced enhanced proportionality rules for small banks, particularly in relation to disclosure requirements for small and non-complex institutions. In addition, the Council has revised the ‘fit and proper’ framework for assessing the suitability of management bodies and key function holders. The next stage is for trilogue negotiations to begin between the three EU institutions to agree on final versions of the text of the proposed Regulation and Directive. |
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RTS - Gross Jump-to-default (Market Risk) |
On 18 November 2022, Commission Delegated Regulation (EU) 2022/2257 on RTS relating to the alternative standardised approach (“ASA”) for market risk under the Capital Requirements Regulation was published in the Official Journal (here). The RTS stipulate technical requirements in respect of the calculation of the own funds requirement under the ASA to capture the default risk of exposures to debt and equity instruments. The Delegated Regulation enters into force on 8 December 2022. |
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RTS – Calculation of Exposure to CIUs |
On 24 November 2022, the Commission adopted a Delegated Regulation on RTS on the calculation of risk-weighted exposure amounts of collective investment undertakings (“CIUs”) under Article 132a(4) of the Capital Requirements Regulation (here). The provisions of this Delegated Regulation specify how institutions are to calculate the risk-weighted exposure amount referred to in Article 132a(2) of the Capital Requirements Regulation where one or more of the inputs required for that calculation are not available. The Parliament and the Council will now scrutinise the Delegated Regulation and, if neither object, it will be published in the Official Journal and enter into force 20 days after publication. |
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RTS - Residual Risk Add-on under ASA |
On 29 November 2022, Commission Delegated Regulation (EU) 2022/2328 containing RTS specifying exotic underlyings and the instruments bearing residual risks for the purposes of the alternative standardised approach for market risk under the Capital Requirements Regulation was published in the Official Journal (here). The RTS specify:
This Delegated Regulation enters force on 19 December 2022. |
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ITS - Disclosure of ESG Risks |
On 30 November 2022, the Commission adopted an Implementing Regulation amending the ITS laid down in Implementing Regulation (EU) 2021/637 as regards the disclosure of ESG risks (here). This Implementing Regulation adds a new Article 18a into Implementing Regulation (EU) 2021/637 setting out uniform formats and associated instructions for the disclosure of information on ESG risks. The Parliament and the Council will now scrutinise the Implementing Regulation and, if neither object, it will be published in the Official Journal and enter into force 20 days after publication. |
| Insurance / Insurance Distribution | |
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Guidelines on Applications for (Re)Insurance Authorisation |
On 14 November 2022, the CBI published its Guidelines on completing and submitting life insurance, non-life insurance and reinsurance applications (here). The purpose of these Guidelines are to provide guidance for obtaining authorisation as a (re)insurance undertaking in Ireland and topics covered include:
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EIOPA Initiatives - Sustainable Finance |
On 18 November 2022, EIOPA announced details of initiatives relating to sustainable finance (here). These initiatives include:
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Implementing Regulation -Technical Information |
On 22 November 2022, Implementing Regulation (EU) 2022/2282, which sets out the technical information for calculating technical provisions and basic own funds for reporting under the Solvency II Directive, was published in the Official Journal (here). The Implementing Regulation lays down the technical information for (re)insurers to use when calculating the technical provisions and own funds for reporting from 30 September 2022 until 30 December 2022. The Implementing Regulation entered into force on 23 November 2022 and has applied since 30 September 2022. |
| Investment Firms/MiFID | |
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CBI Webpage - MiFID Forms |
On 9 November 2022, the CBI updated its webpage on the forms relevant to MiFID firms (here). |
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RTS - Liquidity Measurement under IFD |
On 14 November 2022, the EBA published a final report on RTS for specific liquidity measurement under the Investment Firms Directive (“IFD”) (here). The draft RTS specify, how the liquidity risk and elements of liquidity risk are to be measured by competent authorities in a manner that is appropriate to the size, structure and internal organisation of investment firms and the nature, scope and complexity of their activities. The draft RTS will be submitted to the Commission for endorsement following which they will be subject to scrutiny by the Parliament and the Council before being published in the Official Journal. The RTS will apply 20 days after publication. |
| Investment Funds | |
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Information Note: Sustainable Finance and Asset Management |
On 14 November 2022, the CBI published an information note ‘Sustainable finance and the asset management sector: Disclosures, investment processes & risk management’ (the “Note”) (here). The Note is intended to provide information on the main disclosure issues and outline risks identified by the CBI in terms of potential greenwashing or areas where there has been a lack of transparency or clarity. The key aspects of the Note relate to:
Further detail on the Note is available in our briefing (here). |
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Macroprudential Framework – Property Funds |
On 24 November 2022, the CBI announced a macroprudential policy framework for Irish property funds (here) which is also detailed in the CBI’s Financial Stability Review 2022:II (here). On the same date, ESMA published its advice on the new framework (here). The new macroprudential framework consists of (a) a 60% leverage limit on the ratio of Property Funds’ total debt to their total assets and (b) a CBI Guidance on redemption terms for Property Funds to avoid liquidity mismatch. “Property Funds”, for the purpose of the new measures, are alternative investment funds which are domiciled in Ireland, authorised under domestic legislation and which invest 50% or more directly or indirectly in Irish property assets. Further detail on the new framework is available in our briefing (here). |
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CBI Letter to Managers of LDI Funds |
On 30 November 2022, the CBI issued an industry letter in respect of liability driven investment funds (“LDI Funds”) (here). The purpose of this letter is to ensure that current levels of resilience are retained and to set out a notification process to the CBI in the event a fund manager is considering reducing the resilience levels of an LDI Fund denominated in GBP. The CBI also sets out expectations for LDI funds denominated in other currencies. Further detail on the industry letter is available in our briefing (here). |
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ESG Consultation - Fund Names |
On 18 November 2022, ESMA published a consultation paper on Guidelines on funds’ names using ESG or sustainability-related terms (here). The draft Guidelines contained within ESMA’s consultation are aimed at ensuring that the name of a fund that uses ESG or sustainability-related terms is aligned with its investment characteristics and objectives. This alignment between the name of the fund and the investments characteristics or objectives is achieved by linking the disclosure of the ‘minimum proportion of investments’ (expressed in percentage) used to meet the financial product’s characteristics or objectives to the threshold indicated in the draft Guidelines. The consultation period will run until 20 February 2023. |
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Guidelines for Money Market Funds |
On 30 November 2022, ESMA published its final report on Guidelines on stress test scenarios under Article 28 of the Regulation on money market funds (the “MMF Regulation”) (here). The Annex to the final report sets out the text of the updated Guidelines and the calibration of scenarios for 2022. |
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Administrative Sanctions |
On 16 November 2022, the CBI announced that it had fined and reprimanded a UCITS management company in respect of breaches of UCITS investment fund regulations (here). |
| PRIIPs | |
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PRIIPs Q&As |
On 14 November 2022, the ESAs published an updated version of its Q&As on the key information document (“KID”) requirements for packaged retail and insurance-based investment products (“PRIIPs”) (here). The updates to the Q&As reflect the introduction of rules contained in the amended PRIIPs RTS set out in Delegated Regulation (EU) 2021/2268 which will be generally applicable from 1 January 2023. |
| EMIR | |
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RTS - Commodity Derivative Clearing Thresholds |
On 28 November 2022, Commission Delegated Regulation (EU) 2022/2310 amending RTS laid down in Delegated Regulation (EU) 149/2013 relating to the commodity derivative clearing thresholds under EMIR was published in the Official Journal (here). This Delegated Regulation amends the clearing thresholds contained in Delegated Regulation (EU) 149/2013 by increasing the clearing threshold for commodity derivatives from €3 billion to €4 billion and applies from 29 November 2022. |
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RTS - Collateral Requirements |
On 28 November 2022, Commission Delegated Regulation (EU) 2022/2311 amending RTS laid down in Delegated Regulation (EU) 153/2013 relating to temporary emergency measures on collateral requirements under EMIR was published in the Official Journal (here). This Delegated Regulation amends Delegated Regulation (EU) 153/2013 to temporarily expand the pool of eligible collateral to public guarantees and uncollateralised bank guarantees (subject to certain conditions). This Delegated Regulation applies from 29 November 2022 and its provisions expire on 29 November 2023. |
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Corrigendum to ITS |
On 24 November 2022, a corrigendum to Commission Implementing Regulation (EU) 2022/1860 laying down ITS under EMIR with regards to the standards, formats, frequency and methods and arrangements for reporting was published in the Official Journal of the European Union (here). This corrigendum makes a minor amendment in Article 4(1) on page 71, replacing the text ‘in accordance with paragraphs 2 to 14’ with ‘in accordance with paragraphs 2 to 13’. |
| Central Counterparties | |
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RTS - CCP Recovery and Resolution |
On 25 November 2022, the Commission adopted three Delegated Regulations containing RTS supplementing the Regulation on the recovery and resolution of central counterparties. The Delegated Regulations cover:
The Parliament and the Council will now consider the draft Delegated Regulations and, if neither object, the Delegated Regulations will be published in the Official Journal. |
| Central Securities Depositories | |
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CSDR Q&As |
On 25 November 2022, ESMA published an updated version of its Q&As on implementation of the Central Securities Depositories Regulation (the “CSDR”) (here). ESMA has added a new Q&A on settlement discipline in Part III, relating to settlement fails, which clarifies that CSDs should publish reports on settlement fails on their website for free, on an annual basis, by the end of February of each year. The first publications should take place by the end of February 2023. |
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RTS – Settlement Discipline |
On 15 November 2022, ESMA published a final report amending Article 19 of Commission Delegated Regulation (EU) 2018/1229 which lays down RTS on settlement discipline (here). The final report contains draft amending RTS removing the separate process established for the collection and distribution of the cash penalties in relation to settlement fails on cleared transactions to put the CSDs in charge of the entire process of collection and distribution of penalties. ESMA will submit the draft RTS to the Commission for endorsement in the form of a Commission Delegated Regulation. Following the endorsement by the Commission, the Commission Delegated Regulation will be subject to the non-objection of the Parliament and of the Council. |
| Market abuse | |
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MAR Q&As |
On 25 November 2022, ESMA published an updated version of its Q&As on the Market Abuse Regulation (“MAR”) (here). ESMA revised Q&A number 6 on the prevention and detection of market abuse, in particular on persons professionally arranging or executing transactions. This Q&A concerns the application of the obligation to detect and report market abuse under Article 16(2) of MAR. The revised text explains that investment firms providing direct electronic access (DEA providers) with respect to their DEA clients’ trading activity come under the broad definition of “persons professionally arranging or executing transactions” for the purposes of the obligation to detect and report market abuse under Article 16(2) of MAR. |
| AML/CFT | |
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CBI Registers |
On 9 November 2022, the CBI updated its FAQs on the Central Beneficial Ownership Register for Certain Financial Vehicles (here). The CBI also updated FAQs on the Ireland Safe Deposit Box, Bank and Payment Accounts Register (“ISBAR”) (here). On 18 October 2022, the CBI published the attestation document for the purpose of not reporting Safe Deposit Box Returns under ISBAR (here). This attestation document is used to confirm that the safe deposit box return is not required as the credit institution does not offer a safe deposit service. |
| Payments | |
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SEPA Payment Account Access rulebook |
On 30 November 2022, the European Payments Council (“EPC”) published the first version of the Single European Payments Area (“SEPA”) Payment Account Access scheme rulebook (here). The rulebook is a compilation of rules, practices and standards to enable eligible assets brokers or asset holders to join, participate and operate in the SEPA Payment Account Access scheme (“SPAA”). The rulebook took effect on 30 November 2023. |
| Other | |
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Selected Consultations, Discussion Papers, Speeches and Reports Published |
BPFI - Sustainable Finance Paper, Continued Public-Private Coordination Central to Ireland’s Transition to Net Zero (here) CBI – Private Motor Insurance Report 4, National Claims Information Database (here) EBA – Report on the application of the infrastructure supporting factor (here) EBA - Opinion on the set-up and operationalisation of intermediate EU parent undertakings (“IPUs”) under Article 21b CRD IV Directive (here) EBA – Consultation paper - Guidelines amending Guidelines EBA/GL/2022/01 on improving resolvability for institutions and resolution authorities under articles 15 and 16 of Directive 2014/59/EU (Resolvability Guidelines) to introduce a new section on resolvability testing (here) EBA - Guidelines on the use of remote customer onboarding solutions (here) EIOPA – Discussion paper on methodological principles of insurance stress testing – cyber component (here) EIOPA - Technical information on the relevant risk-free interest rate term structures with reference to the end of October 2022 (here) EIOPA - Technical information on the symmetric adjustment of the equity capital charge for Solvency II with reference to the end of October 2022 (here) ESMA – October Newsletter – Spotlight on Markets (here) ESMA – Report: Administrative and criminal sanctions and other administrative measures imposed under the Market Abuse Regulation in 2021 (here) ESMA – Annual Report – 2022 On the application of waivers and deferrals (here) ESMA – Consultation Paper Review of the RTS on the information to be provided in an application for authorisation and registration under the Benchmarks Regulation (here) ESMA – Final Report: Review of the RTS on the form and content of an application for recognition under the Benchmarks Regulation (here) ESMA – Consultation Paper: Review of the technical standards under Article 34 of MiFID II (here) ESMA - Final reports on Guidelines reflecting mandates introduced by the Regulation on the recovery and resolution of central counterparties (here) ESRB - Letter to the Parliament (here) and a letter to the Council's working party (here) on the review of the regime under the Solvency II Directive ISDA - ‘In Review’ Newsletter October 2022 - A compendium of links to new documents, research papers, press releases and comment letters published by ISDA (here) Task Force on Nature-related Financial Disclosures - Third draft version of its disclosure framework (here) Revenue Commissioners - updated FAQs for the central register of beneficial ownership of trusts (“CRBOT”) (here). Revenue also published updated CRBOT FAQs and troubleshooting for UK trustees and advisors (here) Single Resolution Board – SRB Work Programme 2023 (here)
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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.
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