Financial Services Regulation and Compliance – Banking May 2022
Retail Banking CEO Roundtable
On 17 May 2022, the Central Bank of Ireland (CCR) met with the CEOs of the five major retail banks in Ireland to discuss the large-scale migration of customer bank accounts and the actions needed to ensure this activity takes place in line with customer needs and expectations. Agreement was reached on the establishment of a strong client-centric approach. The following areas are identified as requiring further work:
- better planning – the need for the sector to collaborate on a collective approach with agreed timelines and joint planning across institutions
- client-focused arrangements – taking into account the specific circumstances a client may face and strongly supporting them in their move
- proactive communication – so customers can understand the bank’s processes, including how and when key customer decisions will be made
- system-wide engagement – the need for an inclusive forum where banks engage as a group with other actors and stakeholders in a way that is helpful and enables issues to be anticipated and resolved
Public consultation on the retail banking review
On May 16, 2022, the Department of Finance launched a public consultation on the Retail Banking Review. The consultation focuses on retail banking services used by Irish consumers and SMEs. The consultation seeks the views of general stakeholders on the following topics and changes in the Irish market:
- branch services
- cash services
- credit products and services, including mortgages and SME credit
- current, deposit and savings accounts
- other operational challenges for banks, including capital and climate considerations
The consultation will continue until July 8, 2022.
Updated Information on the Credit Institution Fee Approval Process
On May 13, 2022, the CBI released updated information on the Section 149 charge approval process. The updated document includes details on updated Notional Activity Client Profiles which CBI uses to help assess notifications under section 149 and reflects the updated definition of “credit institution” in section 2 of the 1995 Act, following the enactment of protection Consumers (Regulation of Retail Credit and Credit Services Companies Act 2022).
COVID 19 – Prudential measures for regulatory relaxation: credit institutions directly supervised by the CBI
On May 3, 2022, the CBI updated the COVID 19 prudential regulatory easing measures for credit institutions directly supervised by the CBI. Updates include:
- CBI will no longer allow credit institutions to operate below the level of capital defined by their P2G beyond December 31, 2022
- no extension of prudential measures that allowed credit institutions to exclude central bank exposures from their leverage ratios
- The CBI expects all credit institutions under its direct supervision to meet the general minimum level of LCR of 100% from 1 January 2022
- the relief measures concerning the leverage ratio of credit institutions expired on March 31, 2022
EBA announces timeline for 2022 EU-wide transparency exercise and EBA risk assessment report
On 25 May 2022, the EBA announced that it would launch its annual EU-wide transparency exercise for 2022 in September 2022 and plans to publish information on bank exposures and asset quality in early December 2022, as well as the EBA’s risk assessment report. . The exercise will focus on the figures for the second half of 2021 and the first half of 2022.
EBA updates correspondence between technical standards on Pillar 3 publications and technical standards on supervisory reports
On 24 May 2022, the EBA published an updated mapping between the quantitative disclosure data points and the relevant prudential reporting data points. The updated mapping helps institutions meet their disclosure obligations and responds to recommendations and issues raised by competent authorities and the industry. The updated mapping applies to the Reporting Framework 3.0 and Application Technical Standards (HIS) on publications under pillar 3 of institutions.
EBA publishes final technical standards to identify shadow banking entities
On 23 May 2022, the EBA published its final draft regulatory technical standards (RTS) specifying the criteria for identifying entities in the shadow banking system (SBE) for reporting major exposures. Companies included in the consolidated supervision of an institution are not affected by these final RTS projects.
The final draft RTS clarifies that entities carrying out banking activities or services that have been authorized and supervised in accordance with the EU prudential framework should not be considered SBEs. Central clearing counterparties (CCPs) will also not be identified as SBE when they only carry out netting as defined in Article 2(3) of Regulation (EU) No 648/2012 (EMIR).
For entities established in a third country, the final RTS draft distinguishes establishments from other entities:
- Institutions are not identified as SBE provided they are licensed and supervised by a supervisory authority that applies banking regulation and supervision based at least on the Basel Core Principles for Effective Banking Supervision.
- Other entities are not identified as SBE provided that they are subject to a regulatory regime recognized as equivalent to that applied in the Union for such entities in accordance with the equivalence provisions of the relevant Union legal act .
The final draft RTS will be submitted to the European Commission for approval, after which it will be subject to scrutiny by the European Parliament and the Council before being published in the Official Journal of the European Union.
EBA report on the convergence of prudential practices for 2021
On 11 May 2022, the EBA published its annual report on the convergence of prudential practices for 2021. The report revealed that competent authorities have made progress in implementing the supervisory review and evaluation process. The report also found consistent implementation in their supervisory practices of key supervisory priorities for 2021. However, the report flagged areas for improvement, such as ICT risks, namely cyber risks and business model challenges and the respective digital transformation. In addition, the report highlights the need for more harmonized practices in determining capital additions.
Most of the supervisory attention in 2021 has focused on the key theme of capital and liability management, asset quality and credit risk management. ICT and security risk, operational resilience, as well as profitability and business model, received overall less attention from supervisors than the other two topics. The report notes additional room for convergence in the use of internal capital adequacy assessment, consistent risk treatment across the EU and the setting of Pillar 2 guidance.
EBA updates technical standards ahead of its 2023 benchmarking of internal approaches
On 5 May 2022, the EBA published its final draft implementing technical standards (HIS) which specify the collection of data for the 2023 benchmarking of the internal approaches used in terms of market and credit risk and IFRS9 accounting. The updated ITS includes all benchmarking portfolios and metrics that will be used for fiscal year 2023.
For market risk, in order to keep the exercise informative, the data collection is extended to include the collection of new instruments and portfolios, especially those recently applied by the industry. These new instruments are also accompanied by a more logical use of instrument reference numbering in Annex V.
For credit risk, minor changes were made to benchmark portfolios and no changes to data fields for reporting purposes. Minor clarifications are provided in the instructions in Appendix IV on how to deal with changes to the definition of defect.
No changes have been made to the IFRS 9 models.
The draft TSI will be submitted to the EC for approval before being published in the Official Journal of the European Union (PLAY). The ITS will apply 20 days after its publication in the OJEU.
EBA consults on standardized information requirements to support sales of non-performing loans
On 16 May 2022, the EBA launched a public consultation on the draft ITS specifying the information requirements that sellers of non-performing loans (NPL) must provide to potential buyers, with a view to improving the functioning of secondary NPL markets. The aim of the ITS project is to provide a common standard for NPL transactions across the EU, allowing comparison between countries and thereby reducing information asymmetries between sellers and buyers of NPLs. The consultation is open until August 31, 2022.
A public hearing on the draft ITS will also take place online on June 15, 2022.
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 is publishing details of new restrictive measures/sanctions adopted in this regard, along with any associated EU/UN guidance, on their dedicated webpage.