Financial Services Regulation and Compliance – Bank February 2022


New AML regulations to establish a central database of bank accounts and safe deposit boxes

On February 3, 2022, the European Union Regulation 2022 (Anti-Money Laundering: Central Mechanism for Information on Safe-Deposit Boxes and Bank and Payment Accounts) (the regulations) were signed by the Minister of Finance and came into force on that date.

The regulations authorize the Central Bank of Ireland (CCR) establish and maintain a central register of information on safe deposit boxes and bank and payment accounts, in accordance with Article 32a of the Fourth Anti-Money Laundering Directive (4AMLD), as amended by the Fifth Anti-Money Laundering Directive.

4AMLD required Member States to put in place “centralised automated mechanisms, such as central registers or central electronic data retrieval systems, which allow the identification, in a timely manner, of any natural or legal person owning or controlling payment accounts and bank accounts identified by IBAN … and safe deposit boxes held by a credit institution in their territory.”

The regulations apply to credit institutions, including branches, which are established in the State, whether their head office is located in the EU or in a third country.

The CBI has indicated that it is in the process of finalizing the technical requirements for the central database and will make them available to all eligible credit institutions as soon as possible.

CBI requires improvements to retail banking customer helplines

A CBI review of call waiting times on customer helplines at major retail banks highlighted areas for improvement.

The CBI has engaged directly with retail banks to implement robust action plans to ensure that the level of customer service provided on the helplines is sufficient to handle both the volumes of normal calls and dealing with peak events. The banks provided details on the steps they are taking to address the issues highlighted by the CBI review, including increasing capacity and staffing.

The CBI expects companies to report to it on the implementation of these measures during the year.


ECB will not extend capital and leverage relief for banks

On February 10, 2022, the ECB issued a press release announcing that it saw no need to allow banks to operate below the level of capital defined by their Pillar 2 guidelines beyond December 2022. Besides, it will not expand banks’ ability to exclude central banks. bank exposures based on their leverage ratios beyond March 2022.

In response to the COVID-19 pandemic, in March 2020 the ECB allowed banks to operate below the level of capital defined by the Pillar 2 Guidance and the capital conservation buffer. In July 2020, the ECB committed to maintaining this full buffer flexibility until at least the end of 2022.

In September 2020, the ECB allowed banks to exclude certain central bank exposures from the denominators of their leverage ratios due to the macroeconomic circumstances of the pandemic. In June 2021, the ECB extended this measure until March this year.

The ECB noted that, although there is still some uncertainty regarding the impact of the pandemic, banks have sufficient leeway above their capital requirements and above the leverage ratio requirement. As such, benefits provided in response to the COVID-19 pandemic will not be further extended.

EBA issues final guidance on limited network exclusion under Payment Services Directive

The EBA has published its final guidelines (the guidelines) on limited network exclusion (LNE) under the Payment Services Directive (PSD2).

The EBA had become aware of inconsistencies in the implementation and application of the LNE between Member States since the publication of PSD2, which hinders the single market for payment services and creates regulatory arbitrage. The purpose of these guidelines is to clarify and bring together a certain number of aspects related to the application of the LNE. These include the use of payment instruments within a limited network, criteria and indicators for qualifying a limited network of service providers or a limited range of goods and services as such and notification requirements. To address potential concerns about circumvention of PSD2 requirements and to increase transparency for consumers who may not be aware that they do not have PSD2 protection, the guidelines also clarify the provision of excluded services by regulated companies.

The guidelines will apply from 1 June 2022 with an additional transitional period of three months for issuers who already benefit from the exclusion to submit a new notification to their national competent authority.

Keynote speech by Frank Elderson at the ECB’s industry outreach event

On February 18, 2022, Frank Elderson, Member of the Executive Board of the European Central Bank (ECB) and Vice-Chair of the Supervisory Board of the ECB, delivered the keynote address at the ECB’s industry outreach event on the Thematic Review of Climate and Environmental Risks .

His talk, titled “Towards an Immersive Supervisory Approach to Climate and Environmental Risk Management in the Banking Sector,” focused on the current state of climate and environmental risk (THIS) risk management practices in the banking sector, and the forthcoming thematic review of these risks by the ECB.

Mr. Elderson noted that while banks recognize the materiality of C&E risks, little progress has been made towards actively managing these risks. Progress in this regard is a key priority for the ECB. Banks should take a strategic approach to C&E risk management, using the full range of risk management instruments at their disposal.

The 2022 SREP cycle will be marked by several key initiatives, which represent the next level of maturity for the ECB’s C&E risk oversight. The first of these initiatives is the climate risk stress test, launched in January 2022. This is mainly a learning exercise, to see how banks supervised by the ECB are exposed to C&E risks. The second initiative is a comprehensive review of banks’ practices in strategy, governance and risk management – ​​the C&E Risk Thematic Review. The main objective is to assess the evolution of the robustness, effectiveness and completeness of banks’ C&E risk management practices, as well as their ability to manage their C&E strategies and risk profiles.

Following the thematic review, all banks under the direct supervision of the ECB will receive comprehensive feedback outlining any shortcomings identified. Combined with the observations of the climate stress test, this will also be qualitatively integrated into the SREP scores, which may have an indirect impact on the minimum capital requirements.

EBA updates its methodology for assessing the equivalence of regulatory and supervisory frameworks in third countries

On 21 February 2022, the EBA published its updated questionnaires, which are used for the assessment of regulatory and supervisory frameworks in third countries, to reflect certain provisions recently introduced by the revised prudential regulation in the EU.

Following a request from the European Commission, the EBA assessed the prudential and regulatory requirements of third country jurisdictions. The methodology used for this type of evaluation is based on two questionnaires:

  • Stage 1 questionnaire, which provides an initial screening, focusing on the most relevant requirements and principles and identifying similar laws in place.
  • 2nd stage questionnaire, which allows a granular and more detailed investigation of third country frameworks by identifying and mapping rules and provisions similar to the CRR and analyzing discrepancies.

Following the latest updates of the CRD V and the Capital Requirement Regulation (CRR2), which entered into force in June 2021, the EBA has updated the questionnaires to reflect the provisions introduced by the new EU framework. The new questionnaires completely replace the previous questionnaires.

EBA publishes its annual assessment of banks’ internal approaches to calculating capital requirements

On February 22, 2022, the European Banking Authority (EBA) published its reports on the annual market and credit risk benchmarking exercises. These exercises aim to check the consistency of weighted risks (RWA) in all EU institutions authorized to use internal approaches for the calculation of capital requirements. These annual benchmarking exercises contribute to the work carried out by the EBA to improve the regulatory framework, increase the convergence of supervisory practices and, consequently, restore confidence in internal models. For internal credit risk models, the EBA followed its roadmap for the implementation of the regulatory review of internal models.

For credit risk, RWA variability has remained rather stable, despite the pandemic and banks’ efforts to redevelop or recalibrate their models to comply with the policies set out in the EBA’s internal rating (IRB) roadmap. Particular emphasis was placed on the analysis of the impact of the pandemic and the compensatory public measures on the IRB models.

Regarding market risk, for the majority of participating banks, the results confirm a low dispersion in the initial market valuation (IMV) and increased dispersion of VaR bids.

Sanctions imposed in response to the crisis in Ukraine

During February, the EU 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.