The Central Bank of Ireland ("CBI") has published a page on its website entitled "COVID-19 – Prudential Regulatory Flexibility Measures". The page sets out regulatory flexibility that will be applied in certain areas for credit institutions, securities markets, investment management, investment firms, and fund service providers, insurers/reinsurers and credit unions. We have summarised certain of the key takeaways for MiFID investment firms and credit institutions below.
- Extension periods are provided in respect of remittance dates for a number of reports (e.g. certain returns in relation to annual audited accounts, capital adequacy returns, management accounts). However, firms which are in a position to meet the existing reporting deadlines should do so.
- Pillar 3 disclosures - the CBI expects MiFID investment firms subject to CRD IV/CRR to advise of any delay to, the reasons for such delay and, to the extent possible, the estimated publication date of their Pillar 3 reports. MiFID investment firms are to assess the need for additional Pillar 3 disclosures.
- Flexibility is provided for in-scope firms in relation to the submission dates for client assets auditor assurance reports.
- The CBI will require additional targeted information to be submitted by investment firms during this period.
Risk Mitigation Programmes ("RMPs") for Investment Firms
- The CBI expects investment firms engaged in an RMP process which are in a position to meet the existing RMP implementation dates to continue to do so. Individual firms can engage directly with their usual supervisors where they have difficulties in relation to meeting specific RMP submission dates, including the reasons why. Those supervisors will consider on a case-by-case basis.
Central Bank Regulatory Policy Framewor
- The CBI will delay updates to its domestic regulatory policy frameworks in respect of investment firms.
- Measures set out in certain recent ESMA announcements will apply. For example, in relation to securities financing transactions reporting obligations, which were due to come into application on 13 April 2020, where National Competent Authorities are not expected to prioritise their supervisory actions until 13 July 2020.
- Clarifications in relation to the Transparency Directive and Market Abuse Regulation are als
Credit Institutions Directly Supervised by the CBI
The CBI has set out regulatory flexibility measures for aspects of the regulatory framework under its remit as well as setting out how it is implementing or adopting certain European Banking Authority and European Central Bank measures
- Recovery options in 2020 recovery plans are to be reviewed and their credibility assessed. The CBI notes that banks can expect supervisory engagement on this point.
- Remittance dates for a number of reports with reporting dates between March and end May 2020 have been extended. However, the CBI will require additional targeted information to be submitted.
- Pillar 3 disclosures - the CBI expects credit institutions to advise of any delay to, the reasons for such delay and, to the extent possible, the estimated publication date of their Pillar 3 reports. Credit institutions are to assess the need for additional Pillar 3 disclosures.
RMPs for Credit Institutions
- The CBI is applying flexibility in relation to the deadlines for remedial actions/measures related to prudential banking supervision only. The CBI expects credit institutions engaged in an RMP process which are in a position to meet their existing RMP implementation dates to continue to do so. Individual firms can engage directly with their usual supervisors where they have difficulties in relation to meeting specific RMP submission dates, including the reasons why. Those supervisors will consider on a case-by-case basis.
- Pillar 2 Requirements can be partially met by certain instruments that are not Common Equity Tier 1 capital.
- Credit institutions can operate temporarily below the level of capital defined by the Pillar 2 Guidance, the capital conservation buffer and the liquidity coverage ratio.
- Credit institutions should continue to apply sound underwriting standards, pursue adequate policies regarding the recognition and coverage of non-performing exposures, and conduct solid capital and liquidity planning and robust risk managemen
- The CBI has confirmed that it will apply certain regulatory flexibility measures set out in recent EBA announcements.
Remuneration and dividends
- Remuneration policies, practices and awards must be reviewed to ensure they are consistent with and promote sound and effective risk management also reflecting the current economic situation.
- Remuneration, in particular, its variable portion should be set at a conservative level and deferral/increasing proportion paid in instruments considered.
- Dividends should not be paid for the financial years 2019 and 2020 until at least 1 October 2020, and credit institutions should refrain from share buy-backs aimed at remunerating shareholders.
Originally published April 2020
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.