On the 5 July 2024, Derville Rowland, Deputy Governor of the Central Bank of Ireland (“Central Bank”) delivered a speech on financial literacy. Rowland described financial literacy as a “core element of making the best decisions possible”. She emphasised the point that any strategy surrounding financial literacy must seek to rebalance the scales towards consumers. While acknowledging the importance of individuals acting for themselves, Rowland highlighted that the State’s consumer protection code must ensure that consumers’ interests are secured.

Deputy Governor Rowland initially discussed how the Central Bank views financial literacy and then detailed some of the work that is being carried out in this regard, with the specific goal of rebalancing the scales on favour of consumers, as follows:

The scales of knowledge

The Deputy Governor acknowledged that well-informed consumers are less likely to be vulnerable to harmful actions in the market such as fraud and scams and more likely to make good financial decisions. Recent research by the UK’s Financial Conduct Authority (“FCA”) outlined that experience is the most effective learning tool but the gaining of such experience is stymied by the fact that the most important financial decisions made by consumers are usually “one-shot decisions”, for example taking out a mortgage. This is in stark contrast to the firms made up of experienced people whose expertise far outweighs that of the consumer. Therefore, in most cases, there is a misbalance of knowledge.

The Central Bank prioritises three elements when rebalancing the scales:

• the onus on individual consumers to be as informed as possible on the financial decision they are undertaking;
• there is a duty on financial services firms to secure their interests, to design and provide suitable products and to recommend the most suitable from their range; and
• there is a responsibility on the State’s consumer protection framework to ensure that firms are protecting consumers’ interests and where they fail to do so, that remedies are provided.

Some specific examples of the work the Central Bank is undertaking is as follows:

Review of the Consumer Protection Code (“CPC”)

The importance of financial literacy was detailed in the Central Bank CPC Review Discussion Paper which was published in October 2022. The feedback in the consultation paper evidenced a strong support for a national strategy on financial literacy. A crucial element of financial literacy is ensuring that consumers understand the protections available to them when using financial services and products. The Central Bank will be developing a Consumer’s Guide to the Code which will set out what protections are provided in simple terms.

Digital Literacy

Engagement in the financial services market requires digital literacy which, Deputy Governor Rowland noted, can be challenging for some consumer groups. Interactive investment platforms, personalised financial advice and educational content and digital solutions can, if deployed effectively, empower consumers to take control of their financial futures. The emerging financial influencers or “finfluencers” introduce a new challenge for consumers as they are not registered advisors yet are providing financial advice to consumers.

The Central Bank expects firms to provide consumers with good quality, clear information to facilitate the making of sound financial decisions. Indeed, this will be a requirement in the update to the CPC. Further, Deputy Governor Rowland states that  financial services firms are expected to move away from providing consumers with disclosures in a “tick box” manner and move towards an approach that will provide consumers with sufficient information. This information should be clear, accurate, up to date and avoid the use of unnecessary technical language. 

Cross-agency response

Deputy Governor Rowland notes that addressing the challenges surrounding financial literacy requires a collaborative approach. The Central Bank acknowledged its crucial role in supporting other key stakeholders in the development of financial literacy and will continue to provide information to support consumers such as the recent warnings to consumers about risks surrounding crypto, Buy Now Pay Later firms, frauds and scams. To do this, it has launched an online Consumer Hub, where it publishes information to educate consumers. The OECD recommends that financial education is introduced to schools to build financial resilience. The Central Bank has begun engaging with schools and is piloting a programme that encourages Central Bank staff to visit their local schools, and is also exploring enhancements to its public exhibitions and visitor centre that would be beneficial to schools.

Pensions Research

Pensions are an example of where financial literacy plays a vital role; the consumer must be educated in order to make important decisions regarding their pension. In this regard, Deputy Governor Rowland pointed to research completed by the Central Bank which evidenced challenges that consumers face with pensions, for example, cost of living pressures, competing financial commitments and a lack of understanding when it comes to planning for their financial future may affect some consumers’ ability to prioritise pension saving.  The Central Bank believes that there is an opportunity for stakeholders to collaborate in order to educate consumers and help them make educated decisions on their long-term financial well-being. To address this, the Government introduced an auto enrolment scheme from January 2025 which is a new retirement savings system for employees. The introduction of this scheme will support the growth of capital markets, which is an objective of the European Union. The Central Bank has been working with the Pensions Authority and the CCPC and will “continue to support any future initiatives relating to pension education or literacy, including examining the role that financial services firms can play in this regard”.

In conclusion, Deputy Governor Rowland reemphasised the Central Bank’s commitment to the protection of consumers while highlighting its regulatory role in setting rules, monitoring compliance and taking appropriate action in cases of misconduct. 

On 1 July 2024 The European Insurance and Occupational Pensions Authority (“EIOPA”) published its updated decision (“Decision”) on the collaboration of the insurance supervisory authorities of the member states of the European Economic Area (“EEA”).

The Decision supplements EIOPA’s Decision of 10 June 2021 on collaboration between supervisory authorities.

The Decision states that provisions in Directive (EU) 2019/2121 amending Directive (EU) 2017/1132 as regards cross-border conversions, mergers and divisions (“Mobility Directive”) apply to the cross-border conversions of insurance and reinsurance undertakings. To ensure a smooth implementation of the Mobility Directive in the insurance sector, a new framework for collaboration between the departure and destination supervisory authorities is being established, the details of which are set out in annex II (“annex”).

EIOPA sees the ongoing collaboration between departure, destination and host Supervisory Authorities as crucial to ensure the proper functioning of the single market by maintaining a level playing field for (relocating) undertakings and ensuring the same level of protection for policyholders. In that context, early and regular communication between the departing and destination countries is encouraged in the annex. Such an approach, it is hoped, should safeguard the interests of both the undertaking to be relocated and the policyholders and beneficiaries thereby promoting public confidence in the relocating undertaking.

Part I of the Decision sets out the general considerations applicable to the subject matter of the decision and includes referenceto the following:

• general aims and scope;
• principles of cooperation, addressing:
  • active and early engagement and collaboration;
  • transfer of supervisory information and knowledge; and
  • the role of EIOPA in facilitating the process (which is envisaged to be a facilitative one);

Part II of the Decision deals with cooperation during the relocation approval process, the sharing of supervisory knowledge, granted permissions at solo and group level, and notifications, specifically across the following areas:

• the transfer of supervisory information and knowledge;
• the treatment of open supervisory issues to include the handover of issues and any resultant jointly developed supervisory plan;
• the treatment of already granted permissions or other approvals under the Solvency II Directive;
• Freedom of Establishment (“FOE”) and Freedom of Services (“FOS”) Notifications; and
• applicable additional considerations in the case of a cross-border group.

Part III of the Decision addresses consumer protection considerations, specifically as follows:

• information from the undertaking to policyholders and beneficiaries and the role of Supervisory Authorities; and
• any material change in the terms and conditions affecting the rights of policyholders and beneficiaries, to include the preservation of the right to cancel a contract in such circumstances.

EIOPA’s Role

As stated above, EIOPA sees its role as being facilitative, promoting effective information exchange, cooperation and coordination between departure and destination Supervisory Authorities. Further, EIOPA views its role as instrumental in terms of ensuring a smooth and efficient relocation process. In case of differing views between the departure and destination Supervisory Authorities on any of the permissions or other specifications made under the Solvency II Directive, EIOPA shall be informed. If the divergent views stem from differences in the implementation of the Solvency II Directive, EIOPA may consider developing supervisory convergence tools to address the issue, in the case that the issue is considered material and impacting the level playing field. If the divergent views derive from different technical opinions, the departure and destination Supervisory Authorities should strive to reach a common understanding with EIOPA’s support.

EIOPA may provide supervisory authorities with technical assistance and expertise during the transition, particularly in complex cases or where specific guidance is required.

Next Steps

The Decision shall enter into force on the day following its adoption, being 2 July 2024. 

On 4 July 2024, the European Banking Authority (“EBA”) issued guidelines on the ‘travel rule’ (the “Guidelines”).

The travel rule refers to the information that must be provided with a transfer of funds and certain crypto assets, and also lists the steps that payment service providers (“PSPs”), intermediary PSPs (“ISPS”), crypto-asset service providers (“CASPs”) and intermediary crypto-asset service providers (“ICASPs”) should take to identify missing or incomplete information, and the course of action if a transfer of funds or a transfer of crypto-assets lack the required information.

The aim of the EBA is to establish an effective approach to implementing a harmonised travel rule across the European Union (“EU”). This will enable relevant authorities to trace transfers in order to anticipate or investigate any money laundering and terrorist financing.

Background

In June 2023, Regulation (EU) 2023/1113 (the “Regulation”) came into effect. This Regulation amends the EU’s legal framework to align with the Financial Action Task Force’s (“FATF’s”) standards through expanding the requirement to include information about the originator and the beneficiary to CASPs. The Regulation also amends Directive (EU) 2015 / 849 to subject CASPs, which are permitted in accordance with Regulation (EU) 2023/1114 (“MICA”) to the same AML / CFT requirements and supervision as credit and financial institutions.

Competent authorities have until two months after the translations into the official EU languages are published to state whether they comply with the Guidelines. The amending Guidelines will apply from 30 December 2024.

The EBA also released guidelines on risk based AML / CFT supervisors of CASPs to regulate their exposure to ML / TF risks. Guidelines on internal policies, procedures and controls to act in accordance with restrictive measures that apply to CASPs along with other financial institutions are currently being worked on.

Next Steps

The amended Guidelines will come into effect from 30 December 2024.

1. ESMA publishes new MiCA rules increasing transparency for retail investors

On 4 July 2024, the European Securities and Markets Authority (“ESMA”) published the second Final Report under the Markets in Crypto-Assets Regulation (MiCA) (“Report”).

The Report covers the following draft technical standards:

• sustainability indicators for crypto-asset consensus mechanisms; 
• business continuity measures for crypto-asset service providers (“CASPs”); 
• trade transparency; 
• content and format of orderbooks and record-keeping by CASPs; 
• machine readability of white papers and the register of white papers; and 
• public disclosure of inside information. 

The draft technical standards aim to provide more transparency for retail investors, clarity for providers on the technical aspects of disclosure and record-keeping requirements and data standards to facilitate supervision by National Competent Authorities (“NCAs”) by doing the following:

• providing market participants with technical requirements to ensure human and machine readability of crypto-asset white papers;
• providing templates and formats for CASP order and transaction records; and
• the rules also detail how CASP trading platforms should publish the data required for pre-and post-trade transparency. Once in place, this will ensure that NCAs have access to the information needed for effective supervision of the EU crypto-asset market.  

Next Steps

The draft technical standards are to be submitted to the European Commission for adoption. In accordance with Articles 10 and 15 of Regulation (EU) 1095/2010, the European Commission will decide whether to adopt the technical standards within 3 months.

On 5 July 2024, the European Banking Authority (“EBA”) published a statement  for the attention of persons issuing to the public, offering to the public, or seeking admission to trading of asset-referenced tokens (“ARTs”) and e-money tokens (“EMTs”) and for consumers (the “Statement”). 

The Statement states that the EBA expects issuers and offerors of ARTs and EMTs to comply promptly with MiCA and reminds consumers of risks. Further, the Statement notes that full compliance is required as and from 30 June 2024 and, in that regard,  draws attention to the technical standards and guidelines available on its website.

The EBA draws attention to factors consumers can check before deciding whether to acquire an ART, EMT or other type of crypto-asset and reminds consumers of the risks of acquiring crypto-assets that have not be issued in accordance with the applicable provisions of MiCA, for example where:

• an EMT is issued by an entity in the EU that does not hold an authorisation as a credit institution or electronic money institution;
• where an ART is issued by an entity in the EU that is not a credit institution and has not obtained authorisation under MiCA; and
• where an entity who is not the issuer (of the ART or EMT) has not first obtained the written consent of the issuer.

With reference to all other stakeholders, the EBA states that they should set up, as soon as possible, procedures in order to assess compliance with MiCA of ARTs / EMTs for which they offer related services and should refrain, as from 30 June 2024, from carrying out services that constitute offering to the public, seeking admission to trading or placing non-compliant ARTs / EMTs.

As MiCA brings into the scope of regulation ART/EMT activities, the EBA has shared a single set of supervisory priorities for implementation in 2024/2025 in four areas with the competent authorities, with the aim of driving supervisory convergence, as follows:

internal governance and risk management;

• financial resilience (including, where applicable, own funds requirements and reserve of assets);
• technology risk management; and 
• financial crime risk management.

Next Steps

Given the ‘borderless’ nature of crypto-assets, close cooperation between the EBA, competent authorities and the other European Supervisory Authorities will be important to ensure that MiCA is enforced in a consistent and timely manner as regards ART / EMT activities. With the goals of fostering supervisory convergence, contributing to a level playing field and facilitating the prompt enforcement of MiCA, the EBA states that it will “continue to facilitate a proactive and on-going dialogue between EU competent authorities on authorisation decisions and market developments”.

On 3 July 2024 the Department of Finance (“Department”) published its Annual Report (“Report”) for 2023. The Report sets out the activities and achievements of the Department during 2023, a year during which, the Report notes, fiscal and economic attention was focused on the inflationary situation, its impact and the resulting cost of living crisis.

The Report is comprised of three sections:

1. Strategic goals, of which there are five, namely:

• Balanced, sustainable economic growth;
• Sound public finances;
• A well-regulated and sustainable banking and financial sector;
• International leadership in economic decision making; and
• Promoting environmentally sustainable progress.

2. Governance and operations; and

3. Relevant appendices.

This update gives a high level overview of Strategic Goals 1 and 3 and focuses on Strategic Goal 3 in more detail.

Strategic Goal 1: Balanced, sustainable economic growth

The Report states that the Department seeks to make progress on the objectives set out in the Statement of Strategy 2023-2025: 

• Balanced and sustainable pace of economic growth that contributes to social inclusion; and
• A reduction in public and private indebtedness.

The Report highlights the situation as regards inflation in Ireland, noting that headline inflation peaked at 9.6% in June 2022 while core inflation averaged 5.1% for 2022. This is in contrast to the situation in May 2023 where headline inflation stood at 1.9% and core inflation was at 2.5%. As a result of these inflationary pressures, it was noted that central banks continued to tighten monetary policy during 2023.

The Report assesses the performance of the Department across a number of areas under strategic goal 1 to include:

• Cost of living;
• Tax debt warehousing scheme;
• Mortgage interest relief tax;
• Brexit; and
• Long term economic and fiscal assessment.

Strategic Goal 2: Sound public finances

Some of the areas assessed by the Department under this heading include:

• The trajectory towards a balanced budget once allowance is made for the economic cycle and windfall corporation tax receipts;
• An enhanced international tax reputation to include corporation taxation;
• The maintenance of market access on favourable terms; and
• A supportive taxation system for the environment, enterprise and employment.

This section also outlines various legislative acts and initiatives introduced across various spheres in 2023 to include:

• Finance Act 2023;
• Personal tax;
• Participation exemption roadmap;
• Ireland’s engagement on EU and international tax reform;
• Angel investor relief; and
• The bank levy.

Strategic Goal 3: Well regulated, sustainable banking and financial sector

In terms of achieving this goal, the Report sets out that the Department seeks to make progress on the following objectives that were set out in Department’s Statement of Strategy 2023 – 2025:

• a competitive and resilient domestic and international banking, insurance and financial services sector that meets the needs of consumers and businesses;
• a resilient funds sector that positions Ireland well to play an important role in the development of the EU capital markets; and
• availability of sustainable credit union, bank and non-bank funding sources to extend recovery into the domestic economy and to respond to the needs of a changing economy.

The Report goes on to discuss progress made and initiatives undertaken during 2023 across a number of different areas as follows:

Mortgage Lending

The following points were highlighted:

• in a meeting with the mortgage industry in August 2023, (then Finance Minister) Michael McGrath emphasised that banks and all mortgage entities should be aware of the challenges being faced by consumers and that such customers should be assisted by the relevant mortgage provider;
• greater clarity should be provided to customers on the possibility of switching provider and that this option should be fully supported by all mortgage entities, including the existing mortgage creditor;
• as a result of this meeting, the Banking Payments Federation of Ireland announced a number of further measures by the mortgage industry to assist their customers, facilitating people to redeem an existing mortgage with a non-bank creditor and to refinance it with new credit from a credit institution or other lender.

EU Banking and Financial Services Dossiers

The Report notes that 2023 saw the advancement of a number of policy files at EU level to include:

• a legislative proposal to progress the Banking Union was published in April 2023. This set out a framework to ensure that the appropriate tools are in place to address the failure of all types of banks, including small and medium-sized banks. Proposals for the broadened application of resolution tools in crisis management, the harmonisation of certain features of bank insolvency and further harmonisation of use of deposit guarantee funds in crisis management were also included;
• the agreement of final legal texts as regards Basel III which have since been published in the Official Journal. The regulation has an implementation date of 1 January 2025 and the directive will have a transposition deadline in January 2026;
• the Daisy Chain Regulation, which is a short technical amendment to the bank resolution framework with targeted adjustments that play a role in improving a credit institution’s resolvability. In order to give effect to this Regulation, Minister McGrath signed the European Union (Bank Recovery and Resolution) (Amendment) Regulations 2023 [S.I. No. 485 of 2023] on 2 October 2023. It should be noted that there has been a further amendment to this regulation. The ‘Daisy Chains’ Directive has been published in the Official Journal as  Directive (EU) 2024/1174 following  political agreement between the EU Council and European Parliament in December 2023.  It amends the Bank Recovery and Resolution Directive (“BRRD”) and the Single Resolution Mechanism Regulation (“SRM Regulation”). EU Member States must transpose the changes to the BRRD by 13 November 2024, and apply those changes from 14 November 2024.   The changes to the SRM Regulation will be directly effective.  
• the Directive regarding Financial Services Contracts Concluded at a Distance was published in the Official Journal of the European Union on 28 November 2023 and measures will apply from 19 June 2026. The deadline for transposition of this directive is 19 December 2025;
• in order to give effect to EU Directive 2021/2167 on Credit Servicers and Credit Purchasers, Minister McGrath signed the European Union (Credit Servicers and Credit Purchasers) Regulations 2023;
• the Council and the European Parliament reached a political agreement on the instant payments proposal on 7 November 2023. The regulation on instant payments was published in the Official Journal on 19 March 2024 and entered into force on 8 April 2024.

Retail Banking Review

The publication of the Retail Banking Review was approved in November 2022 and all 34 recommendations are now government policy. The following applies for present purposes:

• Access to Cash: with the goal of protecting the resilience of the cash system, work on a heads of bill in relation to access to cash legislation was completed in late 2023 and approved by government in January 2024. The Report notes that drafting of the bill by the office of the parliamentary counsel to the government is now underway;
• National Financial Literacy Strategy: the Retail Banking Review contained a recommendation for the Department to lead on the development of a national financial literacy strategy to meet certain OECD obligations. The Report sets out that a mapping report on financial education provision in Ireland was published on 19 April 2024 and the strategy will be developed and published by the end of 2024.

Financial Consumer Protection Roadmap

The Financial Consumer Protection Roadmap was published in September 2023 with the goal of supporting consumers in a rapidly evolving banking and financial services environment.

2023 Consumer Sentiment Banking Survey

This survey was published in September 2023. The survey found that:

• consumers’ overall satisfaction with their main provider remains steady at 82%; and
• there was an increase in the use of ‘fintech’ including a growing use of smartphone apps, contactless payments and a rise in the market share of “digital only” banking providers.

Anti-Money Laundering and Combating the Financing of Terrorism

The Report notes the following:

• in July 2021, the European Commission published a new package of proposed AML legislation to replace 5AMLD. Outstanding elements of the legislative package were agreed and finalised at EU level under the Belgian Presidency in H1 of 2024;
• during 2023, Regulation (EU) 2023/1113 of the European Parliament and of the Council on information accompanying transfers of funds and certain crypto-assets was agreed and published. As regards transposition, the Report states that the European Union (Information Accompanying Transfers of Funds) Regulations 2017, S.I. No. 608/2017 will be replaced by the end of 2024.

National Payments Strategy

The Report references that the retail banking review recommended that the Department lead on the development of a National Payments Strategy (“NPS”) in 2024. The NPS purports to do the following:

• set out a roadmap for the future evolution of the entire payments system, taking account of developments in digital payments, cash usage and how future changes should be made to the legislative criteria relating to access to cash;
• take account of the EU legislative landscape, including existing proposals on instant payments, payment services, legal tender and the digital euro; and
• to ensure that the Irish payment system is resilient and it can be trusted both by its retail participants and consumers alike.

The final strategy will be published in H2 2024.

Insurance

Under this heading, the Report highlights the following:

• agreement on amendments to the Solvency II Directive, and new rules on insurance recovery and resolution (the Insurance Recovery and Resolution Directive) was reached by the European Council and Parliament in December 2023;
• the domestic focus was on supporting the cabinet committee sub-group on insurance reform to implement the pro-consumer action plan for insurance reform. The Report notes that most of the actions are completed, specifically referring to the actions assigned to the Department, to include:
  • publication, by the Central Bank, of the first mid-year national claims information database reports on private motor insurance and employer’s and public liability insurance, together with the 2022 annual private motor insurance report;
  • continued work by the office to promote competition in the insurance market, including over 120 stakeholder meetings and engagement with IDA Ireland to provide greater clarity on the needs of the Irish market and work to encourage new entrants; and
  • submission to the Minister of the Central Bank’s ‘Review of Differential Pricing Regulations in the Private Car and Home Insurance Markets’, as required under the Insurance (Miscellaneous Provisions) Act 2022.
• The enactment of two statutory instruments in 2023 adjusting the percentage rate for the Motor Insurers Insolvency Compensation Fund, and amending the scope of levies collected from EU insurers for the Insurance Compensation Fund.