Central Bank of Ireland publishes Markets Update for March 2022

On 4 March 2022, the Central Bank of Ireland published the latest of its regular Markets Updates, setting out a number of alerts both from itself and from ESMA and the EBA.

Of particular note from this edition:

1. Central Bank updates its communication on regulatory flexibility for Securities Markets, Investment Management, Investment Firms and Fund Service Providers

On 1 March 2022, the Central Bank updated its April 2020 communication (which allowed firms and market participants a degree of flexibility in light of the challenges posed by the COVID-19 crisis) to remove measures that have expired and will not be extended. The Central Bank may provide further updates as required.

Further details of the Central Bank’s current expectations are set out here and include:

Pillar 3 Disclosures

MiFID investment firms (other than Class 3 MiFID investment firms that do not issue additional Tier 1 instruments) should assess the need for additional Pillar 3 disclosures on prudential information that may be necessary to properly convey the firm’s risk profile in light of COVID-19 challenges. The assessment should take into account the extraordinary measures that regulators, central banks and others have taken to address the adverse systemic economic impact of the outbreak.

Pillar 2 Guidance

The Central Bank now expects in scope MiFID investment firms to hold capital in accordance with any Pillar 2 Guidance communicated to the particular firm by the Central Bank.

Additional Data Requests

Through the pandemic, the Central Bank required firms to submit additional targeted information so the Central Bank could monitor the effects of COVID-19 on the financial sector. The Central Bank notes that it may need to do so again in the future, depending on how the pandemic develops, but will aim to be measured and pragmatic in terms of the type and frequency of requests.

Firms expected to continue to engage constructively with the Central Bank and to respond to any requests in an expedient manner.

Risk Mitigation Programmes (RMPs) for Investment Firms, Fund Service Providers and Market Operators

In April 2020, the Central Bank allowed a measure of flexibility in relation to deadlines for remedial actions/measures so firms could remain resilient and continue to serve their customers.

The Central Bank now expects firms to meet specific RMP submission dates and, where there are concerns about meeting these deadlines, firms should engage in a timely manner with their usual supervisors.

Fund Service Provider on-site visits to outsourcing service providers/delegates

In respect of due diligence arrangements and periodic on-site visits to outsourcing service providers and delegates, Fund Service Providers

• should take into account the location of relevant service provider(s) as part of their ongoing oversight, and ensure controls are in place to identify and address the material challenges facing such location(s) during the pandemic
• must be satisfied with the due diligence (DD) arrangements in place pertaining to their delegates – however, while COVID-19 related travel restrictions are in place, DD monitoring can be carried out remotely using available technology to achieve the same result (as far as possible)
• should conduct risk assessments to identify aspects of the outsourcing relationship where appropriate DD may be difficult to achieve remotely and consider how to mitigate identified risks until an onsite review is completed
• should proactively engage with Central Bank supervisors, including informing supervisors if a delay is likely to persist for an extended period of time beyond the typical process for completing on-site visits.

European Single Electronic Format (ESEF) Regulation

Issuers with securities listed on an EU regulated market must publish annual financial reports in accordance with the European Single Electronic Format (ESEF) for financial years (FY) beginning on or after 1 January 2020.

As a result of COVID-19, Member States were allowed to delay ESEF obligations by 1-year to FY beginning on or after 1 January 2021. Ireland is opting to make use of the one-year postponement.

The Central Bank will continue to accept annual financial reports from Irish issuers subject to the Transparency Regulations 2007 and the ESEF Regulation in PDF format for FY beginning between 1 January 2020 and 31 December 2020.

Issuers choosing to publish annual financial reports in accordance with the ESEF Regulation in 2021 (for FY beginning between 1 January 2020 and 31 December 2020) will still be able to do so.

2. The Central Bank revises its “Publication of national provisions governing marketing requirements for AIFs” webpage

On 4 March 2022, the Central Bank revised its Publication of national provisions governing marketing requirements for AIFs webpage to include a list of information and documentation which must be submitted to the Central Bank where an AIF situated in another jurisdiction proposes to market to retail investors in Ireland.

The information to be submitted includes

• the full name of the AIF
• the full name and address of its management company and/or AIFM
• the full name and address of the depositary
• the jurisdiction in which the AIF is authorised and its supervisory authority’s name and address
• the full name and address of the facilities agent to be used

The documentation (to be submitted in English or Irish or accompanied by a translation in English or Irish) includes

• a completed RIAIF application form and letter explaining any material differences between the requirements applicable to the AIF and those applicable to a RIAIF
• a statement or certificate from the AIF’s supervisory authority confirming that it is authorised.
• a certified copy of the constitutional document
• the prospectus and any amendments thereto
• the latest annual report and any subsequent half-yearly report.

3. Industry Communication related to Fund Service Providers effectively managing risks due to the Russian war in Ukraine

On 07 March 2022, the Central Bank issued an industry communication in relation to Fund Service Providers (including fund management companies, fund administrators and depositaries) effectively managing risks due to the Russian invasion into Ukraine.

The communication covers, in particular, (a) financial sanctions, (b) Valuation, liquidity and fund suspensions and (c) engagement with the Central Bank.

The Central Bank will have regard to the contents of the communication as part of its supervisory engagements or other action, including enforcement action, it might take.

The communication must be brought to the attention of all members of the Board of the Fund Service Provider, fund, relevant Pre-Approved Control Function holders and other relevant responsible persons.

Fund Service Providers should

• take the communication’s contents into account when responding to unfolding events, particularly with respect to the financial sanctions, valuation of funds, liquidity management and decisions regarding dealing arrangements.
• engage with their relevant Central Bank supervisor in a timely manner where matters of concern arise or potential risks look likely to crystallise.