Welcome to our to the point newsletter. Every month we look back at the most relevant developments in the area of financial regulation in the CEE region.
Insights waiting for you in this edition:
- ESG
EC – New package of measures to strengthen the foundations of the EU sustainable finance framework
ESAs – Reports on greenwashing in the financial sector
- Capital markets
ESMA – Guidelines on templates for summary resolution plans and for written arrangements for resolution colleges
- Banks and financial institutions
Council of the EU – Provisional agreement on the implementation of Basel III reforms
EBA – Updated list of risk indicators and analysis tools
EBA – Final resolvability testing guidelines
EBA – Final draft of implementing technical standards (ITS) on supervisory bench-marking for the 2024 exercise
- AML
Council of the EU – Deal on access to financial information
- Regulation with scope across sectors
EP and Council – Proposal for a Directive amending directives UCITS, Solvency 2, AIFMD, MiFID, IDD and proposal for a regulation amending regulation PRIIPs-KID
EBA – Final report on draft amending implementing technical standards (ITS) on supervisory disclosure under the CRD
Council of the EU – Agreement on financial services contracts concluded at a distance
CZ Parliament – New draft acts from the area of financial law
Spotlight:
Deposit Interest – Can Czech Payment Institution
Retain Interest Accrued on Clients' Funds?
The rights of payment institutions in respect of the funds (and
accrued interest) entrusted to them by their clients have recently
been under scrutiny following a rise in deposit interest rates. Is
a payment institution allowed to retain interest accrued on funds
safeguarded for clients and deposited to a bank account, as
required under PSD II?
Some are in favour of the interpretation that payment service
providers do indeed acquire ownership of the funds entrusted to
them (in which case, they would generally acquire ownership of
interest too). In respect of small payment institutions, this can
be further supported by prohibition to distribute any interest to
clients, as set forth under the Czech Payment Services Act. It can
therefore be argued that small payment institutions are not
restricted from retaining accrued interest. It is important to note
that, under Czech law (contrary to other jurisdictions such as
Austria or Poland), such prohibition currently applies only to
small payment institutions. Accordingly, when it comes to other
types of payment institution, due to the lack of any specific
public law guidance, this matter shall be governed by civil rather
than public law.
Due to the absence of a clear regulatory framework addressing this
issue in the Czech Republic, this question largely boils down to an
assessment of the class of contractual arrangement under which the
contracts for payment services fall. Is this more likely to be a
mandate agreement (in Czech: príkazní
smlouva) under which a payment institution solely acts as an
administrator of the funds or an accountagreement (in Czech:
smlouva o úctu), which would more likely indicate
that the payment institution can retain interest without any
further actions needed?
We always advise our clients to specifically address their rights
to interest in the terms and conditions or other contractual
arrangements with their clients.
European Union
ESG
13/06: EC – New package of measures to strengthen
the foundations of the EU sustainable finance
framework
The EC published a new package of measures to build on and
strengthen the foundations of the EU sustainable finance framework
(along with accompanying Q&A), which includes:
1. a proposal for a regulation of ESG ratings providers; ESG rating providers offering services in the EU will also need to be authorised and supervised by ESMA;
2. an overview of the recent measures and tools put forward to address key implementation issues and questions raised by stakeholders; the EC is also publishing a EU Taxonomy Navigator, a guidance document on the taxonomy for non-experts; and
3. transition finance – the package provides guidance and
practical examples for companies and the financial sector on
utilising the tools of the EU sustainable finance framework for
transition finance, aiming to facilitate transition finance for
companies at different stages of sustainability performance,
including SMEs.
01/06: ESAs – Reports on greenwashing in the
financial sector
The ESAs published reports (EBA, ESMA, EIOPA) in which they presented a common
high-level understanding of greenwashing applicable to market
participants. The ESAs understand greenwashing to be a practice
where sustainability-related statements, declarations, etc. do not
clearly and fairly reflect the underlying sustainability profile of
an entity, a financial product or financial services, which may be
misleading to consumers, investors or other market participants.
The ESAs also highlight that misleading sustainability-related
claims can be made and spread either intentionally or
unintentionally and in relation to entities and products that are
either under or outside the remit of the EU regulatory
framework.
Capital markets
23/06: ESMA – Guidelines on templates for summary
resolution plans and for written arrangements for resolution
colleges
The ESMA published final reports on guidelines on the summary of resolution plans
and guidelines on templates for written
arrangements for resolution colleges under the resolution regime
for central counterparties (CCPs) under the CCPRRR, which complement the Commission
Delegated Regulations on resolution plans and resolution colleges. The guidelines on templates for
summary resolution plans provide guidance to resolution authorities
on the information that should be included in the summary, which
will be shared with the CCP, whereas the guidelines on templates
for written arrangements for resolution colleges will assist
National Competent Authorities (NCAs) in establishing and reviewing
resolution colleges, ensuring a smooth process.
Banks and financial institutions
27/06: Council of the EU – Provisional agreement
on the implementation of Basel III reforms
Negotiators from the Council presidency and the EP have reached a
provisional agreement on the implementation of Basel III reforms in
the EU's banking sector, under which negotiators agreed on how
to introduce a minimum exit level that limits the variability of
banks' capital levels calculated using internal models on
improvements in the areas of credit risk, market risk and
operational risk and proportionality for small institutions. It
also establishes criteria for assessing the suitability of bank
management and key function holders, and safeguards supervisory
independence. Furthermore, the agreement includes a transitional
prudential regime for crypto-assets and changes to strengthen
banks' management of environmental, social and governance (ESG)
risks. Finally, the negotiators decided to harmonise the minimum
requirements applicable to branches of third-country banks and the
supervision of their activities in EU.
14/06: EBA – Updated list of risk indicators and
analysis tools
The EBA released an updated list of indicators for risk assessment and
risk analysis tools, along with a methodological guide. It is aligned with the EBA reporting
framework version 3.2 and includes a review of indicators related
to profitability, liquidity, funding and other areas.
13/06: EBA – Final resolvability testing
guidelines
The EBA issued final guidelines on resolvability testing for
institutions and resolution authorities, under which institutions
are required to submit a resolvability self-assessment every two
years, demonstrating their compliance and providing assurance of
adequacy. The first self-assessment is due by the end of 2024.
Authorities will then develop testing programmes based on these
assessments, offering a three-year visibility period for banks. The
initial multi-annual testing programme is expected to be launched
by the end of 2025. Complex banks are also obliged to create a
master playbook for comprehensive resolution planning, with the
first playbook to be submitted by the end of 2025.
05/06: EBA – Final draft of implementing
technical standards (ITS) on supervisory benchmarking for the 2024
exercise
EBA released final draft of ITS for benchmarking credit risk,
market risk and IFRS9 models in the 2024 exercise, with the most
significant change being the roll out of the benchmarking of
accounting metrics (IFRS9) to high-default portfolios (HDP). It
also provides new templates for market risk – the collection
of additional information, notably the Default Risk Charge (DRC)
and the Residual Risk Add-On (RRAO). The EBA's benchmarking
exercise monitors own funds requirements and the impact of
regulatory measures.
AML
06/06: Council of the EU – Deal on access to
financial information
The Council and EP have reached a provisional agreement on an EU
law that aims to facilitate access to financial information for
national authorities, which requires EU member states to make data
from centralised bank account registers available through a single
access point.
Regulation with scope across sectors
EP and Council – Proposal for a Directive
amending directives UCITS, Solvency 2, AIFMD, MiFID, IDD and
proposal for a regulation amending regulation
PRIIPs-KID
Proposals for a new directive and regulation have been introduced, covering
various aspects of the provision and intermediation of investment
services. They include, in particular, permissible methods of
remuneration of intermediaries, product governance, rules on
dealing with investors, professional standards for investment
distributors, categorisation of investors, strengthening of
supervisory powers or mandatory financial education of
investors.
21/06: EBA – Final report on draft amending
implementing technical standards (ITS) on supervisory disclosure
under the CRD
The EBA published a final report on the draft amending ITS on
supervisory disclosure under the CRD, which specifies the format, structure,
contents list and annual publication date of the supervisory
information to be disclosed by competent authorities. The revisions
consider changes in the EU legal framework (Directive (EU) 2019/878 and Regulation (EU) 2019/876), particularly regarding supervisory
reporting and investment firms, with the aim of the improving the
quality and comparability of reported data, enhancing transparency
and providing the market with more information.
06/06: Council of the EU – Agreement on
financial services contracts concluded at
distance
The Council and the EP have reached a provisional political
agreement on the proposal of directive concerning financial
services contracts concluded at a distance, which aims to simplify
existing legislation, enhance consumer protection and ensure a
level playing field for financial services conducted online or
through other remote methods.
Czech Republic
15/06: CZ Parliament – New draft acts from the
area of financial law
There are currently three new draft acts being discussed in the
Czech Chamber of Deputies, namely:
1. a Draft Act amending certain laws in connection
with the development of the financial market – the draft act
introduces a series of measures aimed at contributing to the
development of the CZ capital market, in particular the so-called
investment pension account, along with additional changes to the
third pension pillar; and
2. a Draft Act on the non-performing loans market,
containing regulations on the administration of non-performing
loans; it sets out, among other things, the conditions for such
administration, including the definition of a non-performing loan
administrator and a loan trader.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.