Money rules | EU
- Sanctions compliance and related process and systems updates have kept compliance, legal and IT teams in financial services providers busy since March 2022. There has been a huge effort to ensure compliance with a plethora of rapidly enacted (financial) sanctions, including around deposit-taking and securities services as well as crypto assets. Moreover, payment instructions from customers often have to be closely scrutinised as to compliance of the underlying transaction, e.g. supply or purchase order. Frequently, these tasks coincided with the involvement of sanctions experts in (attempted) asset swaps concerning Russia-related exposures.
Now, as Q3 draws to a close, I am reminded of the popular proverb that you can't make an omelette without breaking eggs. Despite herculean efforts, not every system or process that had to be implemented literally overnight worked out perfectly from the get-go. And this appears to have attracted the attention of competent authorities and prosecutors. Consequently, sanctions-related legal work, which until recently focused on preventive advisory, will be supplemented by a reactive or defensive stream.
But sanctions are by no means the only (or most) exciting topic in CEE financial markets these days. As my colleagues explain below, we are seeing tighter lending standards on the one hand and political activism (credit vacations) at the expense of lenders on the other. On the regulatory side, the MiCA is about to be adopted. And finally, legislative changes introducing collective action proceedings will also have a long-lasting impact on financial markets.
Money rules | Austria
- ESG update: RTS under the Sustainable Finance
Disclosure Regulation. The Commission Delegated Regulation
(EU) 2022/1288, containing the Regulatory Technical Standards (RTS)
under the Sustainable Finance Disclosure Regulation (EU) 2019/2088
(SFDR) was published in the Official Journal of the EU on 25 July
2022. With no material changes from the final draft published on 6
April 2022, the RTS specify the content, methodologies and
presentation of information to be provided under the SFDR by
financial market participants and financial advisors in relation to
sustainability indicators and the adverse sustainability impacts of
investment decisions. In addition, prescribed form templates for
pre-contractual disclosures and annual reports for certain
financial products and the statement for key performance indicators
under the principal adverse impact regime are included. The
provisions will become applicable on 1 January 2023.
Viktoria Stark
Lending | Austria
- Revised minimum standards for lending
business. As of 1 July 2022, revised FMA Minimum Standards
for Lending Business and other transactions with counterparty risk
apply, replacing the 2005 standards. They apply to all credit
institutions not supervised by the ECB (for ECB supervised
institutions the ECB will decide whether to adopt them). Among
other amendments reflecting the changing environment in supervising
lending business, the new minimum standards strengthen the
principle of dual votes and strict separation of front office
(markets) and back office (risk management). This principle will
apply without exception to all levels up to the managing board. No
credit approval may be granted against the vote of risk management.
Other than in the past, the new minimum standards do not refer to
lending business with retail customers as a per se lowrisk
business.
Peter Feyl
Lending | Poland
- From 29 July 2022, borrowers who took PLN
mortgage loans can apply for credit vacations. The programme has
been introduced to give some relief to consumers dealing with very
high interest rates (due to soaring inflation). However, the banks
can lose badly from the government initiative. Pekao SA, one of the
largest banks in Poland, has estimated that losses caused by credit
vacations could reach PLN 2.4bln, assuming that 85 % of eligible
persons will participate. Similar estimates have been made by ING
Bank Slaski, mBank and Alior Bank. Even assuming that only 60 % of
those eligible will take part, Alior Bank claims that losses for
the whole company can fluctuate as high as PLN 466m. In a few
weeks' time the results of the new regulation will be revealed;
at this point the aforementioned data are mere speculation.
Weronika Kapica
Money rules | Austria
- Model Clause drawn up for covered bonds. Austria transposed
Directive (EU) 2019/2162 in the Covered Bonds Act, which entered
into application on 8 July 2022. However, in Austria for a credit
claim to be included in the issuer's cover pool register, the
consent of the borrower is needed. The (internal/external) trustee
monitors that the consent has been given. If consent has not been
given, the credit claim is not deemed to be part of the cover pool.
The Austrian Chamber of Commerce has now published model clauses to
be used in order to satisfy the requirement of prior consent.
Maximilian Nusser
Money rules | EU
- Crypto update: Landmark crypto regulation about to be
adopted. The news spread like wildfire in the crypto
scene: On 30 June 2022, the EU Council presidency and the EU
Parliament reached a political agreement on the Markets in
Crypto-Assets Regulation (MiCA). While some commentators view the
MiCA as a necessary attempt by European legislators to end the
crypto "wild west", others see it as an obstacle to the
development of the European crypto industry. In any case, the MiCA
will introduce a comprehensive, crossborder regulatory framework
for the offering and provision of services related to crypto
assets. Still, some issues, such as the regulatory treatment of
NFTs, are yet to be fully resolved. The MiCA is expected to be
formally adopted by the end of this year. Most of its provisions
will become applicable 18 months later.
Michael Schmiedinger
Marketplace| Slovenia
- Strength in numbers: Class action regime put to test in banking
sector. Over the summer, a group of Slovenian banks were sued for
alleged breaches of consumer law in respect of fluctuating interest
rates (EURIBOR floor clauses). The lawsuits were lodged against the
banks by a consumer organisation on behalf of all affected
borrowers based on the Slovenian Collective Actions Act. While the
Collective Redress Directive was technically
not yet implemented in Slovenia, the Collective Actions Act already
covers many of its features, including opt-in/opt-out optionality
and express permissibility of third-party litigation funding. That
said, the act (which entered into force in 2018) remains largely
untested in practice and the proceedings are expected to shed light
on several important issues, including the organisational
conditions applicable to claimant entities.
Vid Kobe
Lending | Austria
- Higher requirements for real estate financing. The Regulation
on Financing of Residential Real Estate at Credit Institutions
(Kreditinstitute-Immobilienfinanzierungsmaßnahmen-Verordnung
– KIM-V) entered into force on 1 August 2022, defining strict
limits for mortgage lending to private individuals. The FMA
implemented the new lending standards following recommendations by
the Financial Market Stability Board to limit the systemic risk in
residential real estate financing (in lieu of the capital-buffers
based approach that was taken in other Member States). The rules
stipulate that the loan-to-value ratio must not exceed 90 % (a 20 %
exception quota is granted to credit institutions). Additionally,
the monthly debt service must not exceed 40 % of household income
(10 % exception quota) and the maximum term of the debt financing
is 35 years (5 % exception quota). In aggregate, a maximum of 20 %
of all loans may exceed these limits. Loans up to a EUR 50,000 de
minimis threshold are excluded from these rules.
Philipp Kudweis
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