FIG Top 5 at 5 - 20/03/2025

1. Deputy Governor Madouros of the Central Bank delivers speech at BPFI National Payments Conference

On 13 March 2025, Deputy Governor of the Central Bank of Ireland ("Central Bank") Vasileios Madouros, delivered a speech ("Speech") at the BPFI National Payments Conference. The Speech centred around the theme of payments innovation in Ireland and the transformative potential of technology in this area.

The Deputy Governor reiterated his main message from last year's BPFI conference, in that, Ireland is lagging behind other jurisdictions as regards payments availability and options for businesses and households. However, he noted that the National Payments Strategy ("NPS") has enabled this matter to be addressed, highlighting that realising the outcomes in the NPS needs to be a collective near-term priority. For more information on the NPS, please see FIG Top 5 at 5 dated 24 October 2024.

Rapid Changes

Deputy Governor Madouros emphasised the rapid shift from cash to electronic payments as regards retail transactions over the last number of years, noting the method as being the preferred choice for the majority of society. However, the Deputy Governor specifically reiterated the Central Bank's commitment to ensuring that cash remains available as a payment option.

Paying by account

Noting that the growth in electronic payments has stemmed, for the most part, from innovation in card schemes, Deputy Governor Madouros went on to address the international use of paying by account. He pointed to the benefits associated with this payment option, such as, strengthening competition, lowering costs for merchants and consumers and improving system-wide resilience. He noted that there is substantial further work needed to make pay-by-account solutions broadly available in Ireland and in that regards, pointed to its prioritisation in the NPS.

DLT

The Deputy Governor then turned his attention to distributed ledger technology ("DLT"), noting its potential to reduce frictions and inefficiencies, by removing the need for parties to a transaction to individually update and reconcile their own ledgers. The Deputy Governor further noted the potential of DLT beyond the payments sphere, adding that it introduces the potential for a diversity of digital assets to co-exist on shared ledgers. In terms of the future, Deputy Governor Madouros stated that it is likely that we will see increasing integration of DLT into financial services, including payments and that as regards regulation, central banks and regulators cannot afford to stand still.

Central Bank's role

The Deputy Governor highlighted that the main aim of the Central Bank, as regards the payment system, is to ensure trust. He also noted the Central Bank's aim of ensuring that the benefits of innovation for consumers are realised, while risks are effectively managed. In this regard, he pointed to the work of the Central Bank in the following areas:

• the exploration of the use of new technologies for settlement in central bank money;
• the preparation phase for a Digital Euro; and
• the responsive approach to regulation and supervision by the Central Bank regarding the evolution of the payments ecosystem, specifically mentioning:
  • the increased supervisory attention on the payments and e-money institutions sector;
  • the increased focus on operational resilience, with the implementation of DORA by regulated firms being a key focus for the Central Bank for 2025; and
  • the fact that the Central Bank is now the national competent authority for the authorisation and supervision of entities in Ireland subject to MiCA.

Domestic Sector Engagement

The Deputy Governor noted that the Central Bank can act as a "convening force", bringing stakeholders together to promote better public policy outcomes in payments and he pointed to the example of the Irish Retail Payments Forum and the work that has been carried out as regards the identification and removal of barriers to the development of account-to-account payment solutions in Ireland. He also stated that the Central Bank intends to engage with the sector, later this year, on developments and implications regarding new technologies in payments, including DLT.

Deputy Governor Madouros also noted the Central Bank's innovation sandbox as being key to deepening the understanding of risks and opportunities associated with novel technologies.

Payments as a Strategic Priority

The Deputy Governor observed that the extent to which payments are seen as a strategic priority across the Irish financial system is uneven, and that parts of the sector providing services to domestic households and businesses need to take a more forward-looking approach than has been seen to date.

Deputy Governor Madouros stated: "Active exploration of new technologies and innovations is also an important enabler for incumbent financial institutions to better understand their benefits and risks, consider the implications for their business models, and prepare for the future."

He noted that, while Irish financial institutions did not participate in the Eurosystem’s exploratory work on new technologies for wholesale settlement last year, the Central Bank is keen to support those who wish to engage regarding the next steps of this work. Additionally, as regards the Digital Euro, the Deputy Governor highlighted that active engagement with the Central Bank, the broader Eurosystem, and within industry fora, is essential for enhancing understanding and preparedness.

Conclusions

The Deputy Governor emphasised that failure to keep pace is a real risk, both from the perspective of central banks and regulators as well as the financial system itself.

Finally, Deputy Governor Madouros stated that: "Digitalisation is one of the most powerful "mega-trends" shaping our society and economy. And payments are the lifeblood of the economy. So innovation in payments – done well and safely – can unlock broader economic benefits. It can improve efficiency, enhance competition, and reduce costs for businesses and households. And, at a European level, it can reduce fragmentation, helping to maximise the benefits of the Single Market for all Europeans."

2. ECON publishes draft report on financing and reforms to boost competitiveness and the creation of CMU

On 17 March 2025, the European Parliament’s (“Parliament”) Committee on Economic and Monetary Affairs (“ECON”) published a draft report (“Report”) on facilitating the financing of investments and reforms to boost European competitiveness and the creation of a capital markets union (“CMU”).

The Report stems from the Draghi Report of 9 September 2024, for more information, please see FIG Top 5 at 5 dated 12 September 2024 and Episode 11 of Matheson Talks Financial Regulation. The Report also references a number of other publications and statements of various EU institutions / bodies / authorities.

The Report sets out a series of measures aimed at:

• addressing the challenges presented by Europe’s competitiveness and the challenges posed by conflict on the European continent and geopolitical realignments;
• creating a more integrated and efficient capital market in the EU; and
• identifying the role of public sector in leveraging investments.

Some of the matters highlighted by ECON in the Report are as follows:

• public resources should be focused on ensuring the sustainability and accessibility of public services and infrastructure while catalysing private investment in innovative and clean industries under well-defined conditions;
• the attractiveness of EU capital markets will be increased by further integration of its internal market and the creation of economic opportunities for private investments, which would allow for higher returns and in that regard;
• the Report calls on the European Commission (“Commission”) and member states to develop solutions, whether legislative or not, to foster the creation of an EU-wide capital market that has sufficient size, liquidity, depth and transparency to attract both EU-based and international investors;
• the Report emphasises the Parliament’s support for the integration of institutional frameworks and market structures and reiterates its demand to grant the European Securities and Markets Authority (“ESMA”) direct supervisory powers over pan-European market infrastructures;
• the Report calls on the Commission to rely more on regulations rather than directives, with the aim of limiting national discretion that could lead to fragmentation;
• the Report asks the Commission to explore the idea of creating an EU investment savings account or a label at EU level for simple investment products suitable for retail investors based on common criteria or features such as product simplicity, low costs, asset allocation and risk mitigation techniques, and particularly, to assess the efficiency of a label for investments that are sustainable and located in the EU; and
• the Report calls on the Commission to prioritise a CMU agenda that sustains financial stability, favours access to venture capital and equity investment and reduces over-reliance on bank lending.
• the Report also recognises the need for substantial public sector support to mobilise private investment, particularly in high-risk areas such as decarbonisation. It also highlights the importance of issuing a common safe asset at the EU level to facilitate the achievement of the CMU and address the investment needs identified in the Draghi Report.
• the Report urges the Commission to assess the various features of safe assets and publish a report setting out their common characteristics.
• the Report proposes the establishment of a European economic intelligence unit aimed at connecting industrial need with financial tools.

Next Steps

The Report was prepared by rapporteur Aurore Lalucq, who in the Report, urges all stakeholders and co-legislators to work together to implement the measures set out in the Report, such that the EU is well positioned to meet the challenges of the 21^st century.

3. SRB launches public consultation on resolvability testing for banks

On 17 March 2025, the Single Resolution Board (“SRB”) launched a public consultation (“Consultation”) on the draft version of its operational guidance on resolvability testing for banks (“Guidance”).

Guidance

The purpose of the Guidance is to ensure a harmonised approach as regards implementing a multi-annual testing programme and on how to carry out bank-led resolvability testing, in order to preserve a level playing field across all banks. The Guidance offers guidance to banks on:

• testing areas and sub-areas;
• test methods;
• testing governance expectations;
• testing environment expectations;
• multi-annual testing programme; and
• designing, preparing, and reporting on tests.

The Guidance is divided into two parts – part one deals with general guidance and part two sets out guidance specific to each testing area / sub-area. The Guidance covers desktop exercises, walkthroughs and dry-runs, including drills, as well as operational and management simulations. The guidance does not encompass third-party verification. The Guidance also deals with expectations regarding internal audit activities related to resolvability testing.

Consultation

The Consultation aims to provide the banking sector and other stakeholders with an opportunity to raise questions, seek clarifications and provide views on the draft Guidance.

Section 1 of the Consultation elaborates on the link between resolvability assessment and testing. In this regard, the SRB has set out that building resolvability is a continuous and joint effort by the banks and the SRB’s internal resolution planning teams, which include national resolution authorities. Resolvability starts with the SRB setting expectations and priorities, followed by banks' concrete efforts to develop the necessary capabilities to support the effective execution of a resolution action. Resolvability testing is an important way of verifying that the capabilities built up by the banks can be successfully deployed in practice in case of resolution.

Section 2 of the Consultation sets out the SRB’s approach to resolvability testing and, in particular, the key features of the Guidance.

Next Steps

The Consultation is open for feedback until 5 May 2025. Feedback will be taken into account as regards the further refinement of the Guidance and any key concerns raised in the Consultation will be addressed. Responses received during the Consultation will inform the development of the first multi-annual testing work programme for banks under the SRB’s remit for the period from 2026 to 2028. The SRB have stated that the final version Guidance will be published in Q3 2025.

4. EBA publishes final draft ITS on the joint decision process for internal model authorisation under CRR

On 17 March 2025, the European Banking Authority (“EBA”) published a final report containing draft implementing technical standards (“ITS”) that amend the existing implementing regulation on the joint decision process for internal model authorisation under the Capital Requirements Regulation (“CRR”).

Article 20(8) of the CRR, as amended by Regulation (EU) 2024/1623 (“CRR III”) mandates the EBA to develop draft ITS to specify the joint decision process as regards applications for permissions. This mandate was already part of the CRR, however, CRR III encompasses an overall revised scope for internal models where the possibility to apply these approaches is no longer in place for operational risk. However, the content and objective of the revised mandate under CRR III are the same as the original one.

Accordingly, the EBA decided to amend the existing ITS to take account of changes to the EU legal framework, particularly the fact that the advanced measurement approach for operational risk is no longer applicable.

References to the EBA’s ITS and regulatory technical standards (“RTS”) on the functioning of supervisory colleges have also been updated due to changes in the revised supervisory colleges regulatory framework.

Next Steps

The ITS will be submitted to the European Commission for endorsement. The ITS will then be subject to scrutiny by the European Parliament and the European Council before publication in the Official Journal of the European Union.

5. Further European Updates: (1) MiCA (2) DORA

1. Delegated Regulations on content and format of order book records and presentation of transparency data under MiCA published in OJEU

On 14 March 2025, two Delegated Regulations under the regulation on markets in crypto-assets (“MiCA”) were published in the Official Journal of the European Union (“OJEU”), as follows:

1. Delegated Regulation (EU) 2025/416 with regard to regulatory technical standards (“RTS”) specifying the content and format of order book records for crypto-asset service providers (“CASPs”) operating a trading platform for crypto-assets.
   This Delegated Regulation was adopted by the European Commission (“Commission”) on 29 November 2024. For more information, please see FIG Top 5 at 5 dated 5 December 2024 and FIG Top 5 at 5 dated 11 July 2024.
2. Delegated Regulation (EU) 2025 /417 with regard to RTS specifying the manner in which CASPs operating a trading platform for crypto-assets are to present transparency data.
   This Delegated Regulation was adopted by the Commission on 28 November 2024. For more information, please see FIG Top 5 at 5 dated 5 December 2024 and FIG Top 5 at 5 dated 11 July 2024.

Next Steps

Both Delegated Regulations will enter into force on 3 April 2025, being 20 days after their publication in the OJEU.

2. ESMA publishes official translations of guidelines on estimation of aggregated annual costs and losses due to major ICT incidents under DORA

On 18 March 2025, the European Securities and Markets Authority (“ESMA”) published the official translations of the joint guidelines on the estimation of aggregated annual costs and losses caused by major ICT-related incidents (“Guidelines”) under DORA.

The Guidelines also specify a common template for submission of the aggregated annual costs and losses.

The Guidelines are addressed to competent authorities and to financial institutions and were published by the European Supervisory Authorities (“ESAs”) on 17 July 2024.

Next Steps

The Guidelines will apply from 19 May 2025. Competent authorities are required to notify the respective ESA whether they comply, or intend to comply, with the Guidelines by this date.