The 2017 FIBI conference, “International Banking: The New Normal” was held in June, with support from members and sponsors KPMG and Matheson. While Brexit was a recurring theme at the conference, a number of speakers, including Michael O’Sullivan of Credit Suisse, emphasised the importance of remaining alert to other issues and of not becoming fixated on this one issue. Kieran Donoghue of IDA Ireland expressed confidence that the Republic will secure a number of wins as his organisation “aggressively” pursues the opportunity to lure financial activity from London post-Brexit. Additional topics discussed included navigating the regulatory landscape and the importance of working with Fintechs, with new technology and Fintechs in particular being a key focus of FIBI going forward.
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BPFI is currently considering its response to the recently published Central Bank consultation paper outlining its proposed requirements and guidance in relation to the implementation of certain competent authority options and discretions (O&Ds) arising under
- the European Union (Capital Requirements) Regulations 2014 (‘the CRD Regulations), transposing Directive 2013/36/EU (CRD IV);
- Regulation (EU) No. 575/2013 (CRR); and;
- Commission Delegated Regulation (EU) No 2015/61 (the ‘LCR Regulation’).
This consultation applies to options and discretions under a number of areas including Own Funds, Credit Risk – Standardised Approach, Liquidity, Corporate Governance, Pillar 3 and MiFID Firms.
The EU27 Heads of State are due to make a decision in October/November on the relocation of the European Banking Authority (EBA), having agreed the criteria for the relocation in late June, and with the formal application process closing at the end of July. The Commission will give an assessment of each bid/offer and three voting rounds will then take place among Member States. Ireland has submitted a bid for both the EBA and the European Medicines Agency. The EBA bid is supported by a document published in June by then Finance Minister Michael Noonan promoting Dublin as the new location for the EBA. Speaking at the launch of this document, the Minister said, “We strongly believe that relocation to Dublin is the best option for the important work of the EBA and the least disruptive location for EBA staff. The publication of this document will keep Dublin high on the list of those cities that want to be considered for the relocation of the EBA.” Significant lobbying and diplomatic discussions at the highest levels will be ongoing between the Irish Government and other EU Member States in advance of the final decision.
BPFI has submitted a response to the European Commission Public Consultation on Fintech. Our response highlighted a number of key Fintech developments in Ireland and importantly, the high level of collaboration between banks and fintechs in Ireland. Specific issues of interest include Distributed Ledger Technology, Artificial Intelligence (AI) and Big Data. We also highlighted the benefits of a Regulatory Sandbox at national/EU level. Overall, the approach is that no new regulation is specifically required for Fintech, however guidance on application of regulation in this digital world and with the new technologies in mind would be welcomed. BPFI will meet with the European Commission in July to discuss our response and upcoming actions the Commission may take. The Commission is already assessing the case for an EU licensing and passporting framework for FinTech activities and is expected to develop a specific Action Plan in Q4 2017, which will outline legislative and non-legislative activities that could be undertaken at EU level.
BPFI affiliate, the Federation of International Banks in Ireland (FIBI) held its 2017 banking conference, International Banking: The New Normal in June, with support from members and sponsors KPMG and Matheson. While Brexit was a recurring theme at the conference, a number of speakers, including Michael O’Sullivan of Credit Suisse, emphasised the importance of remaining alert to other issues and of not becoming fixated on this one issue. Kieran Donoghue of IDA Ireland expressed confidence that the Republic will secure a number of wins as his organisation “aggressively” pursues the opportunity to lure financial activity from London post-Brexit. Additional topics discussed included navigating the regulatory landscape in particular PSD 2 and the importance of working with Fintechs going forward.
BPFI has submitted a response to the Central Bank’s consultation paper on potential changes to the investment framework for credit unions. BPFI commented on a number of issues and pointed out that it is crucial that, if restrictions on investments of bank bonds are introduced, a clear, consistent application of restricted investment is applied irrespective of the form of subordination, i.e. Statutory, Structural or Contractual. The paper is proposing that credit unions would not be permitted to invest in subordinated debt instruments that are eligible for MREL. It sets out that this is due to their risk profile and the potential implications for credit unions should the institution that issued the instrument enter into resolution. Based on this, the Central Bank is proposing amending the definition of bank bonds in the 2016 Regulations to clarify that bonds that are subordinated to any senior bonds issued by a credit institution, do not fall within the definition of ‘bank bonds’ set out in the investment regulations. This will have an impact on financial institutions, who will be issuing senior unsecured debt via Holdcos as a result of the Bank Recovery and Resolution Directive (BRRD), as based on the proposed guidelines these bonds will not be compliant.
Two significant financial services heavy weights officially opened offices in Dublin last month, with Citadel Securities, headed up by BPFI President Jonathon Lowey, and Bank of China both launching in June. BPFI were pleased to coordinate with both Citadel and Bank of China on their successful launches.
A large gathering of member bank representatives from retail and international banks recently held a very useful engagement with Central Bank Governor, Philip Lane. Speaking to the theme of ‘Drivers of change in the Banking Sector’, the Governor referenced many areas including cyber security, Brexit and financial innovation as well as alluding to the Bank’s new Working Group on FinTech. The discussion which followed also brought some helpful insight into the Bank’s position on risk appetite and outsourcing.
The Central Bank’s Ed Sibley, Director of Credit Institutions Supervision/Acting Registrar of Credit Unions, was guest speaker at the latest FIBI INED Forum. Attendees found both the presentation and subsequent discussion very helpful, as it focused particularly on what the Bank expects of an INED and what the INED in turn can expect of the Bank. All parties found the engagement to be constructive and helpful.
As keynote speaker and pre-conference breakfast guest at this year’s FIBI international banking conference, Pentti Hakkarainen, Member ECB Supervisory Board, provided member banks with his thoughts on what a sound prudential framework essentially means, namely: strong, clear and simple liquidity and capital requirements, risk sensitive rules (ensuring riskier banks face tighter requirements), as well as an ability to push failing firms out of the market. He also referenced the importance of good governance – stressing that supervisors can afford well-governed banks more room to make their own decisions, thereby providing the space for more innovative competition.
BPFI is currently examining the proposals included in the recently published paper ‘Options for Ireland’s Mortgage Market’ by the Competition and Consumer Protection Commission (CCPC). The assessment was undertaken at the request of the Minister for Finance to meet a requirement of the ‘Programme for a Partnership Government’. BPFI is now engaging with members on the detail of the report and has also met with CCPC representatives to identify areas for further consideration/action.
Non-Performing Loans (NPLs) continue to dominate many discussions at EU level. Most recently, the Economic and Monetary Affairs Committee held a public hearing with the Chair of the Supervisory Board, Danièle Nouy, where Brian Hayes MEP asked Nouy about the definition of NPLs and whether the Single Supervisory Mechanism (SSM) sees the difference between NPLs that are treatable and those that are not. Nouy responded that all NPLs are indeed different depending on whether they relate to corporates/SMEs/mortgages and that the SSM is working in Joint Supervisory Teams (JSTs) to assess bank plans. More generally, Nouy stated that the SSM is also looking into more “forward-looking solutions” to avoid build-up of NPLs in future and that it wants supervisors to have sufficient powers to ensure that banks make timely prudential provisions for losses resulting from NPLs. Meanwhile, the European Commission published an Inception Impact Assessment which outlines its intention around a legislative initiative which could further the development of secondary markets by alleviating impediments constraining the sale and transfer of both direct and indirect loans. A legislative proposal is expected in early 2018. Later in July, Finance Ministers will discuss the NPL situation in Europe along with possible additional actions that could be taken.
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