AML

Following political agreement in December 2023 on the regulation establishing the new central EU AML/CFT supervisor (AMLA), and on the procedure for selecting AMLA's location, the European Commission's assessment of the nine applications to host AMLA (including Ireland's application) will be published in January 2024 ahead of joint public hearings. Political agreement is expected early in Q1 2024 on the remaining two elements of the new AML/CFT package (the 'single rulebook' regulation, and the directive). For more information, read our insights here, here and here.

BANKS' CRYPTO-ASSET EXPOSURES

The Basel Committee on Banking Supervision's public consultation on banks' disclosure of crypto asset exposures closes for feedback on 31 January 2024. The consultation is based on the disclosure requirements contained in the final prudential standard on the treatment of banks' crypto asset exposures published in December 2022. The consultation suggests a standardised disclosure table and set of templates for banks' crypto asset exposures, with a proposed implementation date of 1 January 2025. The BCBS expects that the use of the common disclosure table and templates will support the exercise of market discipline and help to reduce information asymmetry amongst banks and market participants.

BANKS - EU BANKING PACKAGE

The revised Capital Requirements Directive and revised Capital Requirements Regulation (the new 'EU Banking Package') will be published in the Official Journal in early 2024.

While most of this legislative package (focusing on Basel III, managing and supervising ESG risk, 'fit and proper' requirements and third country bank branches) will apply from 2025, certain provisions regarding third country bank branches will need to be transposed by Member States later in 2024.

The European Banking Authority's work on approximately 140 mandates under the EU Banking Package has already started, and will continue throughout 2024 (read the EBA Roadmap on the Banking Package for more information).

BANK RECOVERY AND RESOLUTION DIRECTIVE – GUIDELINES

The EBA's Guidelines to resolution authorities on the publication of the write-down and conversion and bail-in exchange mechanic apply from 1 January 2024.

The aim of the guidelines is to provide a clear framework for resolution authorities to publish their approach to using the bail-in tool. The EBA expects any resolution authorities that have already published information to check if that publication complies with the guidelines. These guidelines are intended to complement the Guidelines on transferability to support the resolvability assessment for transfer strategies and the amended Guidelines on improving resolvability for institutions and resolution authorities.

The EBA's Guidelines on overall recovery capacity in recovery planning will apply from 11 January 2024.

CAPITAL REQUIREMENTS REGULATION - SHADOW BANKING

Commission Delegated Regulation (EU) 2023/2779 supplementing the Capital Requirements Regulation with regulatory technical standards (RTS) specifying the criteria for the identification of shadow banking entities referred to in Article 394(2) of the CRR enters into force on 1 January 2024. The RTS apply to credit institutions when reporting their exposures to shadow banking entities.

CENTRAL SECURITIES DEPOSITORIES REGULATION

Changes to Central Securities Depositories Regulation (CSDR), dealing with settlement discipline and mandatory buy-in, passporting, colleges of supervisors and the provision of banking-type ancillary services were published in the Official Journal on 27 December 2023 and apply on a staggered basis from 16 January 2024.

For more information on these changes, read our insights here. Those insights also highlight other key points to watch from a CSDR/settlement perspective in 2024, such as:

  • Moving the responsibility for the process of collecting and distributing cash penalties for settlement fails on cleared transactions from central counterparties to CSDs from 2 September 2024.
  • Technical advice from ESMA to the Commission arising from ESMA's December 2023 Consultation Paper on the penalty mechanism under the CSDR (which closes on 29 February 2024).
  • Recommendations from ESMA to the Commission arising from its Call for Evidence on the shortening of the settlement cycle (which closed on 15 December 2023). In particular, ESMA will carry out a cost/benefit analysis on any reduction of the EU settlement cycle, and identify if regulatory action is needed to ensure that the impact of the planned shortening of the settlement cycle to T+1 in other jurisdictions (such as the US) is as manageable as possible for EU market participants.

EMIR – EQUITY OPTIONS

The European Supervisory Authorities' joint draft RTS under EMIR (published on 20 December 2023) aim to give clarity to market participants on how to handle equity options from 4 January 2024 (the date on which the current temporary equity option exemption from bilateral margining is due to expire). The ESAs proposed a 2-year extension to the exemption, and also published a no-action opinion.

This interim solution comes in the context of the ongoing work to review EMIR (the proposals are due for discussion in trilogues shortly – read our insights here: EMIR 3.0: Trilogues to start shortly; active account requirement is the key negotiation point). It appears likely that a permanent exemption will be agreed during those discussions.

FITNESS AND PROPRIETY – EXCHANGE OF INFORMATION BY ESAS

The European Supervisory Authorities' joint consultation paper on guidelines on their system for exchanging of information relevant to fitness and propriety assessments closes for feedback on 15 January 2024. The ESAs system would hold limited information on individuals who are subject to a fitness and propriety assessment under EU sectoral provisions. The purpose of the guidelines is to clarify how the system should be used and how data should be exchanged. The ESAs aim to finalise the guidelines in early 2024, with a view to phasing-in their application from 1 July 2024.

INSURANCE

EIOPA's public consultation on its opinion regarding the supervision of captive (re)insurance undertakings closes on 5 January 2024. The opinion sets out EIOPA's supervisory expectations in several areas, including intra-group transactions (especially cash pooling), the consistent application of the prudent person principle as well as governance-related aspects in connection with key functions and outsourcing requirements.

MICA

The following consultations on technical standards and guidelines under the Markets in Crypto-Assets Regulation (MiCA) close for feedback during January 2024:

  • The joint Consultation Paper from the EBA and ESMA on two sets of guidelines on suitability assessments of the management body and holders of qualifying holdings under MiCA closes on 19 January 2024. The draft guidelines on the suitability assessment of the members of the management body of issuers of asset-referenced tokens (ARTs) and crypto-asset service providers (CASPs) provide common criteria to assess the appropriate knowledge, skills and experience of members of the management body as well as their good repute, honesty and integrity and if they are able to commit sufficient time to perform their duties. The draft guidelines on the suitability assessment of shareholders and members with qualifying holdings in issuers of ARTs or of CASPs provide competent authorities common methodology to assess the suitability of the shareholders and members with direct or indirect qualifying holdings for the purposes of granting authorisation as issuers of ARTs or as CASPs, and for carrying out the prudential assessment of proposed acquisitions.
  • The EBA's Consultation Paper with draft RTS on the procedure for the approval of white papers of ARTs issued by credit institutions closes on 22 January 2024. The draft RTS propose steps and timeframes that credit institutions, competent authorities and the ECB or other central banks must follow during the procedure for the approval of a crypto-asset white paper. To ensure consistency, the RTS set out a structure that is similar to the process regulated under Article 17(1)(b) of MiCA for the notification of other information by credit institutions that aim to issue ARTs.
  • The EBA's Consultation Paper on Guidelines on internal governance of issuers of ARTs. Among the matters covered by the consultation paper are responsibilities of the management body, how issuers should identify sources of operational risk and minimise those risks through the development of appropriate systems, controls, and procedures, arrangements to be put in place when relying on third-party entities in respect of reserve of assets, and the establishment of business continuity plans.
  • The EBA's Consultation Paper on draft RTS on governance arrangements for remuneration policies under MICA. These set out the main governance processes regarding the adoption, implementation and maintenance of the remuneration policy and the main policy elements that should be included in the remuneration policy.

ESMA's third and final consultation package is expected to be published in Q1 2024, covering all remaining mandates with an 18-month deadline. These will relate to qualification of crypto-assets as financial instruments; monitoring, detecting and notifying market abuse; investor protection; reverse solicitation; suitability of advice and portfolio management services to the client; policies and procedures for crypto-asset transfer services, including clients' rights; and system resilience and security access protocols. The EBA has published its three consultation packages already (July 2023, October 2023, November 2023).

MIFID II / MIFIR AMENDMENTS

Following the successful conclusion of trilogues on 29 June 2023, and confirmation of final compromise texts by the EU Council on 18 October 2023, the European Parliament will vote on the provisional texts of changes to MiFID II and MiFIR in its plenary session of 15 January 2024. This means that the final texts are likely to be published in the Official Journal towards the end of Q1 2024. The changes focus on EU consolidated tapes, and a general ban on payments for order flow.

On a related point, the European Commission's consultation on replacing the public identifier of over-the-counter (OTC) derivatives in the EU closes on 9 January 2024. As part of the MiFIR review, all trading venues offering trading in OTC derivatives, which are subject to pre- and post-trade transparency requirements, will be required to provide ESMA with identifying reference data that is globally agreed for the purpose of public transparency reporting under MiFIR. The Commission will also need to adopt a delegated act specifying that identifying reference data, including a unique product identifier and any additional identifying reference data, within 3 months of the changes to MiFIR entering into force. As mentioned above, the changes to MiFIR will be subject to a final vote by the European Parliament in its 15 January 2024 plenary session, and are likely to be published in the Official Journal later in Q1 2024

This article contains a general summary of developments and is not a complete or definitive statement of the law. Specific legal advice should be obtained where appropriate.