• December
• November
• October
• September
• August
• July
• June
• May
• April
• March
• February
• January

The primary challenge for regulators is to focus their priorities and ensure that the whole of Europe, including Ireland, is focused on pursuing them together. In these times, it can prove difficult for companies to focus on regulatory issues, while continuing to operate business as usual. The following are some of the more significant changes currently planned for the FS regulatory framework that may affect Irish FS companies:

1. Financial Regulator: The Taoiseach has indicated the role of the Central Bank (CB) is to be reformed to provide for the full integration of the prudential supervision and stability of individual financial institutions, with that of the financial system as a whole. The CB will be placed at the centre of financial supervision and financial stability oversight. This is an overturning of the current structure set up by the Irish government in 2004, whereby the CB and the Financial Regulator (FR) operate independently. The consumer arm of the FR's office will be merged with the Financial Services Ombudsman's office.
   
   
2. Capital Requirements Directive (CRD): The European Commission has proposed a revision of the capital requirements for banks that will improve management of large exposures, supervisions of cross border banking groups, quality of banks capital and liquidity risk management. Restrictions will be placed on the amount a bank can lend to any one party. The proposal will also require banks to set some capital aside even when assets are securitised. Currently banks don't have to do this. Therefore a bank can grant credit knowing that it will not keep the credit risk on its balance sheet. There is a significantly lower incentive to look at the creditworthiness of the debtor if the bank knows they are not carrying the risk.
   
   
3. Harmonisation of European securities law: The European Commission began a public consultation, in April, on the harmonization of securities law which addresses four issues;
   
   1. The legal framework of holding and disposition of securities held in securities accounts, covering aspects belonging to the sphere of substantive law as well as conflict-of-laws
   2. The legal framework governing the exercise of investor's rights flowing from securities through a "chain" of intermediaries, in particular in cross-border situations
   3. The establishment of the free, EU-wide choice of issuers regarding the initial entry of their securities in the relevant holding structures, in particular central securities depositories
   4. The submission of any activity of safekeeping and administration of securities under an appropriate supervisory regime
      
      
4. Anti-Money Laundering (AML); The draft heads of legislation have been submitted to Irish Parliament to comply with the AML third directive. When the Bill becomes available (expectation is Summer 2009) the Financial Regulator will conduct a public consultation on the guidance notes as previously documented on behalf of the industry. These changes will affect all designated bodies. The most significant changes are as follows:
   1. Risk based assessment of "know your client" requirements - this may reduce current process requirements for some organisations
   2. Introduction of transaction based monitoring - large organisations and subsidiaries of the UK would generally already have this process in place
   3. Introduction of specific requirements in relation to PEPs (Politically Exposed Persons)
   4. This is a brand new concept in Ireland and details additional requirements when dealing with customers of political influence
      
      
5. Consumer Protection Code (CPC): The CPC was issued by the Financial Regulator in August 2006 and required compliance by July 2007. This Code provided additional protection to all consumers offered services by financial institutions and resulted in significant change management projects for many financial services organisations. At the time, there were a lot of interpretation issues in relation to the code and each organisation defined requirements on an individual basis. The Financial Regulator will issue a revised version of the code in 2009. It is not anticipated to have significant impact on financial institutions but should provide additional clarity to the initial code.
   
   
6. Consumer Credit Directive (CCD): The CCD was adopted by the European Commission in May 2008, with an ensuing date for completing the transposition set for June 2010 for all member states. The new directive includes the right to withdraw from a credit agreement and early repayment of a consumer loan. It attempts to standardise European consumer credit information and information on the annual percentage rate of charge (APR). The directive applies to credit agreements for amounts between €200 and €75,000. Transposition into Irish legislation is due by May 2010.
   
   
7. The Single Euro Payments Area (SEPA): SEPA will ensure the same basic conditions, rights and obligations to make payments regardless of location within Europe. Implementation of SEPA should make electronic payments consistent and more efficient across Europe. It will eventually include all of the following types of payments across the Euro area: credit and debit card payments, bank transfers and direct debits. The Payment Services Directive (please see below) provides the necessary legal platform for SEPA. The current timeframe for the implementation of SEPA is 2010.
   
   
8. The Payments Services Directive (PSD): PSD came into force in December 2007 and is due to be transposed to Irish legislation by November 2009. It applies to electronic payment transactions. PSD introduces a regulatory regime for all payment institutions. There are 24 national discretions within the directive. The Department of Finance is currently selecting which discretionary requirements will be included in the Statutory Instrument. This is due for consultation in the Spring of 2009. A new suite of conduct of business rules apply to all payment service providers but are more onerous for consumer services. This will require revision of terms and conditions amongst many other changes.
   
   
9. Solvency II: In July 2007 the Commission published its formal framework Directive. The purpose of the directive is to provide a consistent, risk based basis for calculating the capital requirements of (re)insurance undertakings throughout the EU. On 19 November 2008 CEIOPS (Committee of European Insurance and Occupational Pension Supervisors) announced the publication of the report in its fourth quantitative impact study (QIS4). The results of the study show that measured against the level of stress embedded in the QIS4 simulations, as of year end 2007, the European insurance industry appeared to be well capitalised. Implementation is scheduled for 2012.
   

A pervasive theme is the need for clarity, structured thinking and strategic discipline in relation to FS regulation. It is clear that the world of financial services is not going to remain the same. Let us hope the changes are effective in helping to prevent a repeat of the current global recession we find ourselves in.