FIG Top 5 at 5 - 30/01/2025

1. Central Bank of Ireland Updates: (1) Governor Gabriel Makhlouf delivers speech at EU Heads of Mission Meeting (2) Central Bank of Ireland publishes data on Irish payment fraud

1. Governor Gabriel Makhlouf delivers speech at EU Heads of Mission Meeting

On 22 January 2025, Governor of the Central Bank of Ireland (“Central Bank”), Gabriel Makhlouf, delivered a speech at the EU Heads of Mission Meeting.

Reflecting on the importance of open dialogue, mutual respect and meaningful cooperation as regards the development and success of the European project, the Governor noted the current increasingly complex international environment. Governor Makhlouf addressed the changing political landscape, both across Europe and in the US, particularly noting the fact that half of the MEPs in the new European Parliament are newly elected.

The Governor pointed to the fact that this time of political change brings significant challenges for the EU. Acknowledging that the EU has always believed in, and defended, free markets and global integration, he highlighted that the EU now finds itself needing to balance those beliefs with its own strategic independence.

This led the Governor on to consider the European decline, as set out in the Draghi report, where he emphasised that China is leading the way in clean technologies and the US on digitalisation. In addition, the Governor reference the Letta report, specifically, Enrico Letta’s observation that the single market, in its current form, is not sufficient to navigate the global challenges of today, particularly when it comes to digitalisation and climate change. The Governor highlighted the need to carefully consider the recommendations made in the Draghi and Letta reports, in order to address Europe’s competitiveness and resilience.

With the forgoing in mind, some of the matters highlighted by Governor Makhlouf, were as follows:

• a resilient financial system is crucial for maintaining economic stability, fostering growth and safeguarding public confidence. In that regard, the success of the savings and investment union is paramount if Europe is to regain its competitive edge. There must be a focus on unlocking the €11.5 trillion held by Europeans in cash and deposits to drive European innovation. Emphasising the Central Bank’s focus on a risk – based supervisory approach, the Governor reiterated the Central Bank’s aim of ensuring financial resilience;
• the Central Bank is focused on price stability and ensuring that inflation stabilises sustainably at its 2% medium term target. The Central Bank will continue to follow a data driven approach regarding the appropriate monetary policy stance for the Euro area;
• given the uncertainty in the global macro financial environment, the Governor advocated for prudence in decision – making;
• the resilience of the Euro, with the next logical step being the development of a digital Euro, which in turn will future proof the monetary system, maintain trust, promote inclusivity and reduce costs in financial transactions; and
• the presence of a dedicated Central Bank office in Brussels with the aim of being a proactive and effective voice in the EU.
  

2. Central Bank of Ireland publishes data on Irish payment fraud

On 24 January 2025, the Central Bank of Ireland (“Central Bank”) published a ‘Behind the Data’ paper on Irish payment fraud statistics (“Paper”).

The Paper presents new insights on payments fraud in Ireland by main method payments such as credit transfers, card payments, e – money and direct debits.  The Paper also considers how fraud varies as regards the different payment methods, the most common types of fraud and the amount of money lost as a result.

Some of the matters highlighted in the Paper are as follows:

• the rate of fraud in Ireland as a share of all transactions is low, and below the EU average except for card payments.  By value, the rate is 0.001%, and by volume, the rate is 0.01%. As regards the volume rate, this is equivalent to 1 in 10,000 payment transactions impacted by fraud;
• the total value of fraudulent payments rose by 26% in 2023, representing an increase to €126 million from €100 million in 2022. Credit transfers and card payments accounted for the majority of all fraud;
• the euro value of fraudulent payment increased by a smaller amount compared to volume of fraud in 2023, indicating a preference by the fraudsters for numerous low value payments made using cards;
• the accounts to which the fraudulent payments were sent are mostly located outside of Ireland. Approximately 60% of the total value of fraud across 2022 - 2023 involved cross - border payments, amounting to € 77 million in 2023 and € 64 million in 2022. Fraudulent payments sent to domestic accounts amounted to € 49 million in 2023 and € 36 million in 2022;
• approximately 98% of card payment fraud by value related to  ‘issuance of payment orders by the fraudster’. This occurs where fraudsters use a stolen card, account or personal information for a payment;
• as regards fraudulent credit transfers, payer manipulation fraud rose from 27% in the first half of 2022 to 42% by the end of 2023. Payer manipulation occurs through social engineering or impersonation;
• over 99% of all fraudulent direct debits related to unauthorised payment transactions, where customer information is obtained and a mandate set up without the authorisation of the payer;
• the Paper reported that modification of payment order by fraudster is rare and was seen only in relation to credit transfers. This situation occurs where a fraudster intercepts and changes a legitimate payment order;
• incidents of fraud are more prominent when measures such as the EU’s strong customer authentication are not in place. 
  

Next Steps

The Central Bank has stated that further expansion of published data will be available in 2025, at a national and European level. Additionally, the Central Bank intends to provide semi – annual updates on payment fraud statistics, including linking these to the wider European data publications.

2. MiFID / MiFIR Updates: (1) Central Bank of Ireland updates completion guidance on annual conduct of business return and investment products template (2) ESMA communication on new MiFID DPE regime and publication of SI data (3) European Commission adopts delegated regulation on OTC derivatives identifying reference data under MiFIR

1. Central Bank of Ireland updates its annual conduct of business return completion guidance for investment firms

On 21 January 2025, the Central Bank of Ireland (“Central Bank”) updated its Annual Conduct of Business Return  - Guidance for Completion (“Guidance”). The Annual Conduct of Business Return Version 3 (“Return”) is applicable to all investment firms authorised under the European Union (Markets in Financial Instruments) Regulations 2017 (“MiFID Regulations”) and branches established in Ireland by firms authorised in another Member State and providing services in the State under the MiFID Regulations.

The Guidance provides details on how to complete the Return.

Together with some typographical and renumbering updates, the following changes were made under Section 2 Client Details:

• 17 - which deals with  “C3 - Execution-Only Clients” field – has amended wording;
• 18 - which deals with “Of which received investment advice from another regulated entity prior to the execution of the order” field – is new;
• 20 - which deals with C4 – Receipt & Transmission of Orders (R&T) field – is new;
• 21 - which deals with  “Of which received investment advice from another regulated entity prior to the transmission of the order” field – is new;
• 23 - which deals with “C5 -Other Clients” field – is amended to include references to new fields;
• 26 - which deals with “ D- Total Number of MiFID Professional Clients” field – is amended to include references to new fields;
• 29 - which deals with “D3 – Execution-Only Clients” field – has amended wording;
• 30 - which deals with “D4 Receipt & Transmission of Orders (“R&T”) field – is new;
• 31 - which deals with the “D5 - Other Clients” field – is amended to include references to new fields.
  

Central Bank updates its investments product template version 2 completion guidance

On 21 January 2025, the Central Bank of Ireland (“Central Bank”) updated its Investment Product Template  Version 2 Guidance for Completion (“Guidance”).

The Investments Product Template Version 2 (“Template”) is applicable to all investment firms authorised under the European Union (Markets in Financial Instruments) Regulations 2017 (“MiFID Regulations”) and to branches established in Ireland by firms authorised in another member state and providing services in the state under the MiFID Regulations.  The Template is used to gather information on the financial instruments / products sold to retail clients in the relevant reporting year. The Guidance sets out details on how to complete the Template.

• In addition to some typographical and renumbering updates, the following should be noted:
• Inclusion of guidance on two new tabs “Advisory Retail Clients/Customers” and “Non-advisory Retail Clients/Customers”;
• Main Products Template 1.0
  • Insertion of new number 3 which addresses the new tabs above;
  • Insertion of new numbers 7, 8 11, 12, 13 and 14;
• the “Instruments of Concern 1.2” section has been removed; and
• Under SFDR there is a new Q17.
  

2. ESMA reminds firms about new MiFID DPE regime and ends publication of SI data

On 24 January 2025, the European Securities and Markets Authority (“ESMA”) published a press release (“Press Release”) reminding market participants that the new regime for the reporting of over the counter (“OTC”) transactions for post – trade transparency purposes will be fully operational on 3 February 2025.

As a result of the MiFIR review, a new article 21a was inserted into the MiFIR regulation, with the result that responsibility for reporting OTC transactions has been transferred from SIs to new designated publishing entities (“DPEs”).

The DPE regime permits national competent authorities to grant DPE status to investment firms. When a DPE is a party to a transaction it is obliged to make the transaction public by way of an approved publication arrangement (“APA”).

Discontinuation of quarterly SI data

Additionally, ESMA announced that it is discontinuing the quarterly publication of systematic internalisers (“SI”) data with immediate effect. This is due to the fact that ESMA is no longer obliged to perform SI calculations from September 2025. In making this decision, ESMA has taken account of the resources required to produce the SI calculations data and the fact that the regime will end soon in any event. Further, ESMA has stated that this will reduce the administrative burden for investment firms. 

Next Steps

The mandatory SI regime will no longer apply from 1 February 2025. Investment firms will not need to perform the SI test. However, ESMA has stated that investment firms may continue to opt into the SI regime.

3. European Commission adopts delegated regulation on OTC derivatives identifying reference data under MiFIR

On 24 January 2025, the European Commission (“Commission”) adopted a delegated regulation (“Regulation”) supplementing the markets in financial instruments regulation (“MiFIR”) as regards OTC derivatives identifying reference data to be used for transparency requirements under MiFIR. 

The main objective of the Regulation is to comply with the mandate given to the Commission in article 27(5), first subparagraph, of MiFIR, which is to specify the identifying reference data to be used with regard to OTC derivatives for the purposes of the transparency requirements laid down in article 8a(2) and articles 10 and 21 of MiFIR (“Transparency Requirements”).

Article 1 of the Regulation sets out the operative rules on the identifying reference data to be used from 1 September 2026 for OTC interest rate and OTC credit default swaps for the purposes of the Transparency Requirements.

The annex to the Regulation includes a table listing identifying reference data for OTC interest rate swaps. The annex also includes a table listing standard business terms for the reference rates referenced in OTC interest rate swaps subject to the Transparency Requirements.

Next Steps

The Regulation will enter into force 20 days after it has been published in the official journal of the EU.

3. DORA Updates: (1) DORA Irish Regulations are published  (2) EIOPA updates Q&As under DORA (3) ESAs publish terms of reference for EU – SCICF forum under DORA

1. DORA Irish Regulations are published

On 24 January 2025 , S.I. No. 12/2025 - European Union (Digital Operational Resilience) Regulations 2025 was published in Iris Oifigiúil (“DORA Irish Regulations”). The DORA Irish Regulations give effect to the DORA Directive -  Directive (EU) 2022/2556 as at 17 January 2025. The DORA Directive accompanies the main DORA Regulation and obliges EU Member States to amend or clarify the various operational risk or risk management provisions in financial services national legislation pertaining to Credit Institutions, Insurance Undertakings, MiFID Firms, Payment Institutions, UCITS and AIFMs.

In general the wording inserted re-writes existing (general, high-level) organisational obligations in applicable sectoral legislation which required these financial institutions to have business continuity plans. Instead the revised provisions make sectoral legislation more detailed than before by way of reference to DORA Regulation requirements.

We are currently conducting a full analysis of the amendments introduced by the DORA Irish Regulations and will update clients by way of an insight in the coming days.

2. EIOPA updates Q&As under DORA

On 22 January 2025, the European Insurance and Occupational Pensions Authority (“EIOPA”) responded to three Q&As under DORA by providing answers which were received from the European Commission. The Q&As are in relation to the following:

1. the definition of ICT services under article 3(21) of DORA with particular reference to ICT services provided by other financial services entities – available here;
2. whether ancillary insurance intermediaries under Article 1(3) of Directive EU 2016/97 on Insurance Distribution are within the scope of Article 2(1)(o) of DORA- available here; and
3. how insurance intermediaries are to determine whether their group structure is in scope of DORA - available here.

3. ESAs publish terms of reference for EU – SCICF forum under DORA

On 27 January 2025, the joint committee of the European Supervisory Authorities (“ESAs”) published the terms of reference (“ToR”) for the EU – SCICF forum (“Forum”) under article 49(1) of DORA. The Forum is part of the EU systemic cyber incident coordination framework (“EU – SCICF Framework”).

The EU – SCICF Framework envisages itself operating in two ways:

1. non – crisis mode which involves development, maintaining and testing of the EU – SCICF Framework; and
2. crisis – mode, which will facilitate the coordination of response of members in the case of a systemic cyber event.

The activities of the Forum will cover non - crisis mode. Its objective is to facilitate the operation of effective EU  - level coordination in the event of a cross - border major ICT - related incident or related threat that could have a systemic impact on the EU's financial sector. In particular, the Forum is tasked with:

• exercising and testing the protocols and procedures to ensure continued preparedness in the event of activation of the crisis mode of the EU-SCICF Framework;
• preparing the set- up of a dedicated ad - hoc group responsible for managing the crisis mode (when activated); and
• developing and maintaining documents, protocols, procedures, arrangements, taxonomy and plans to support coordination in case of crisis mode, taking into account the existing coordination frameworks and the cyber threat landscape.

The joint committee of the ESAs will produce an internal annual or multi - annual work plan providing an overview of areas of thematic focus and actions, including a testing programme. The plan will form part of the joint committee's work programme.

Membership

The Forum will comprise of representatives of authorities and other bodies at a national and Union level referred to in Article 49 of DORA.

Next Steps

The ToR will be subject to review and endorsement by the joint committee every two years, with subsequent approval by the ESAs board of supervisors. The ToR, approved by the ESAs board of supervisors, are in force since 17 January 2025.

4. New governance structure is launched for transition to T+1 settlement cycle

On 22 January 2025, the European Securities and Markets Authority (“ESMA”), the European Commission (“Commission”) and the European Central Bank (“ECB”)  launched a new governance structure (“Structure”) to support the transition to the T+1 settlement cycle.

In its report of 18 November 2024 (“Report”), ESMA recommended shortening the settlement cycle in the EU to T+1. On foot of this, a new governance structure has been designed to oversee and manage the operational, regulatory and technological aspects of the transition.

The main elements of the new Structure include:

• an industry committee, chaired by Giovanni Sabatini, and composed of senior leaders and representatives from market players;
• several technical workstreams that will operate under the industry committee. These workstreams will focus on the technological operational changes needed in the areas affected by the transition to T+1, such as, trading / matching / clearing / funding and FX, asset management.
  Additionally, there will be two further workstreams that will be responsible for reviewing the scope, and the legal and regulatory aspects, of the changes; and
• a coordination committee that will be chaired by ESMA with representatives from the Commission, the ECB, ESMA and the chair of the above – mentioned industry committee. This committee will ensure coordination between the various authorities and industry.

The Association for Financial Markets in Europe and the European Banking Federation both issued press releases welcoming the official launch of the Structure for the transition to T+1, with both noting that:

“The reduction of the settlement cycle for securities transactions can help reduce counterparty credit risks, improve market efficiency, and address issues arising from the current lack of alignment between the settlement cycles of Europe and other major global markets, which creates costs and inefficiencies for investors, issuers, intermediaries, and market infrastructures.”

Next Steps

ESMA has recommended 11 October 2027 as the best date for the transition to T+1, with a coordinated approach across Europe being desirable. In its Report, ESMA recommended that the transition should occur in phases, with matters such as technology upgrades and regulatory alignment being key milestones.

ESMA has stated that it will publish details as to the governance set – up and participating organisations in the coming days. The first meeting of the coordination committee will take place on 6 February 2025.

Industry representatives interested in contributing to the upcoming work are invited to contact the T+1 industry secretariat.

5. ESMA publishes opinion on draft RTS on conflicts of interest for CASPs under MiCA

On 24 January 2025, the European Securities and Markets Authority (“ESMA”) published an opinion (“Opinion”) on draft regulatory technical standards (“RTS”) specifying certain requirements regarding conflicts of interest (“CoIs”) for crypto – asset service providers (“CASPs”) under MiCA.

Background

On 31 May 2025, ESMA published its final report on the draft RTS on CoIs and submitted it to the European Commission (“Commission”) for adoption. The Commission wrote to ESMA by letter dated 29 November 2024 and informed ESMA that it intended to adopt the RTS on CoIs with amendments, which were included in an annex to the letter. The Commission also referenced the possibility for ESMA to submit a new draft of the RTS on CoIs reflecting the proposed amendments.

Opinion

ESMA has decided to amend the draft RTS on CoIs and resubmit it to the Commission by way the Opinion. Some of the matters addressed in the Opinion are as follows:

• ESMA suggests a limited number of changes to the amendments proposed by the Commission. These changes are set out in the annex to the Opinion;
• ESMA acknowledges that an appropriate balance should be found between, on the one hand, the protection of investors and financial stability related objectives, and on the other hand, promoting safe and sustainable innovation. In this regard, and in view of the Commission’s comments ESMA suggests that the balance be struck in a different way from that suggested by the Commission.

All of ESMA’s suggested changes to the draft RTS on CoIs, that were proposed by the Commission, are set out in section 3 of the Opinion and are also shown as tracked changes in the amended draft RTS on CoIs included in the annex to the Opinion.

Next Steps

ESMA has adopted the Opinion in response to the Commission’s letter of 29 November 2024. The Opinion is being communicated to the Commission, the European Parliament (“Parliament”) and the European Council (“Council”). The Commission may adopt the RTS with the amendments it considers relevant or reject them. The Parliament and the Council may object to the RTS adopted by the Commission within a period of three months.