EU Financial Regulation
AML/CFT - AMLA
The application window for EU Member States to apply to host AMLA, the new EU AML authority, closes on 10 November 2023.
The next round of trilogue negotiations on the AMLA-specific aspects of the EU’s AML package is due to take place around the same time. Key focus points for the negotiations include how the decision will be made regarding where AMLA will be located, and which institutions will be directly supervised by AMLA in the first wave. The Commission proposed that a selection process be carried out every three years, that credit institutions with a presence in at least 7 Member States and financial institutions with a presence in at least 10 Member States would be classified in accordance with their risk profile, and that those with the highest inherent risk profiles would be directly supervised by AMLA. The EU Council and European Parliament want to reduce those thresholds (to seven and four Member States respectively) and to ensure that at least one entity in each EU Member State is supervised directly by AMLA. The EU Council is proposing to cap the number of entities subject to direct supervision in the first wave at 40. Both the EU Council and the European Parliament want crypto asset service providers assessed for inclusion in the first wave of directly supervised entities.
BANKS
Daisy Chain Regulation
The European Union (Bank Recovery and Resolution) (Amendment) Regulations 2023 (S.I. No. 485/2023) come into force on 15 November 2023. These amend the existing European Union (Bank Recovery and Resolution) Regulations 2015 (which transposed the EU Bank Recovery and Resolution Directive (BRRD) into Irish law) to reflect changes made to the BRRD by last year’s Daisy Chain Regulation (Regulation (EU) 2022/2036). For more information on the Daisy Chain Regulation, read our insights here.
Derogation from Own Funds Requirements
The EBA’s public consultation on draft regulatory technical standards to identify extraordinary circumstances of market disruption under which a competent authority may allow an institution to derogate from certain requirements for the calculation of own funds requirements for market risk on the basis of internal models closes on 3 November 2023.
CRYPTO-ASSETS - MARKETS IN CRYPTO ASSETS REGULATION (MiCA)
We expect the European Banking Authority to launch a third round of consultations in November 2023 on its deliverables under MiCA.
The EBA is responsible for developing 17 sets of technical standards and guidelines under MiCA, together with two sets of joint EBA/ESMA guidelines and one set of joint EBA/ESMA/EIOPA guidelines.
Its first round of consultation papers (here) was published in July 2023 and focused on authorisations of issuers of asset-referenced tokens (ARTs), qualifying holdings and complaints handling. The second round of EBA consultations (here) was published on 20 October 2023 and covered the approval of ART white papers (for tokens issued by credit institutions) and the suitability of members of the management body of ART issuers and crypto-asset service providers. The third round of consultations is expected to be focused on the EBA’s prudential mandates.
ESMA also plans a third consultation package following the publication of its first MiCA consultation package in July 2023 (here) and its second consultation package in October 2023 (here). ESMA’s first two packages focused on deliverables with a 12-month deadline for submission to the European Commission. The third package is likely to be published early in Q1 2024.
EMIR - CCP FEES
ESMA’s public consultation on the revision of the Delegated Regulation regarding fees charged to Tier 1 third country central counterparties (CCPs) under the European Market Infrastructure Regulation (EMIR) closes on 10 November 2023. Feedback received will feed into ESMA’s Technical Advice to the European Commission on changes to the Delegated Regulation on fees charged to third country CCPs.
SECURITISATION REGULATION - RISK RETENTION
The long-awaited Risk Retention RTS (Commission Delegated Regulation (EU) 2023/2175) come into force on 7 November 2023. From that date, the existing CRR RTS (Commission Delegated Regulation (EU) No 625/2014) will be repealed
The Risk Retention RTS cover requirements on the modalities of retaining risk; the measurement of the level of retention; the prohibition on hedging or selling the retained interest; the conditions for retention on a consolidated basis; the conditions for exempting transactions based on a clear, transparent and accessible index; the modalities of retaining risk in case of traditional NPE securitisations; and the impact of fees paid to the retainer on the effective material net economic interest.
As mentioned in our recent briefing (here) notable points from the new Risk Retention RTS are:
- The sole purpose principles at Article 2(7) set out when an entity will be regarded as established or operating for the sole purpose of securitising exposures. Both limbs of those principles will need to be met for the sole purpose test to be fulfilled.
- The servicer will be able to act as risk retainer on an NPE securitisation provided that it meets the expertise requirements set out in Article 19 of the Risk Retention RTS.
- For NPE securitisations, the 5% risk retention will be able to be calculated on the basis of the net value of the underlying NPEs.
- There will be three exceptions to the prohibition on selling the retained interest (the insolvency of the retainer, the retainer being unable to continue acting as such (due to legal reasons beyond its control and beyond the control of its shareholders), and where there is retention on a consolidated basis as referred to in Article 14 of the Risk Retention RTS).