1. Central Bank updates various guidance documents

Between 27 and 30 June 2025, the Central Bank of Ireland (“Central Bank”) updated various guidance documents / FAQs, as follows:

• Rules and Guidance applicable to Supervisory Disclosures (updated 27 June 2025) - available here. This rules and guidance document is published pursuant to article 143(1)(a) of the Capital Requirements Directive, as amended (“CRD”), which requires competent authorities to publish the information on texts of laws, regulations, administrative rules and general guidance adopted in the relevant member state in the field of prudential regulation.
• Options and National Discretions (updated 27 June 2025 with new version) – available here. The Capital Requirements Regulation (“CRR”) and the CRD contain a number of national discretions and options which may be applied on the basis of national circumstances. This document contains details as to those options and discretions relating to:
  • options and discretions set out in the CRD, the CRR and the liquidity coverage requirement Delegated Regulation (EU) 2015/61;
  • transitional options and discretions set out in the CRD and the CRR; and
  • variable elements of remuneration under article 94 of the CRD.
• Ireland Safe Deposit Box, Bank and Payment Accounts Register - Frequently Asked Questions (updated 30 June 2025) - available here. This document addresses FAQs regarding the Ireland Safe Deposit Box, Bank and Payment Accounts Register (“ISBAR”). The purpose of ISBAR is to hold information on accounts identifiable by IBAN (including account holders, beneficial owners and signatories), and information on safe deposit box services provided by credit institutions in Ireland, and to enable legally prescribed authorities to search and retrieve information.
• Guidance Notes - Risk Evaluation Questionnaire - Credit Institutions - available here. This guidance document has been updated as of June 2025. It relates to obligations under the Criminal Justice (Money Laundering and Terrorist Financing) Act 2010 (“CJA 2010”), in respect of credit and financial institutions, to have an effective AML / CFT framework in place.
• Guidance Notes - Risk Evaluation Questionnaire - Payment Institutions & Electronic Money Institutions – available here. This guidance document has been updated as of June 2025. It relates to obligations under the CJA 2010, in respect of credit and financial institutions, to have an effective AML / CFT framework in place. 

1. Council and Parliament agree on proposals to review the CMDI

On 25 June 2025, the European Council (“Council”) and the European Parliament (“Parliament”) reached political agreement (“Agreement”) regarding the review of the crisis management and deposit insurance (“CMDI”) framework for banks in the EU. The review relates to three pieces of legislation as follows:

• the Bank Recovery and Resolution Directive (“BRRD”);
• the Single Resolution Mechanism (“SRM”); and
• the Deposit Guarantee Schemes Directive (“DGSD”).

The Agreement reached aims to:

• better safeguard taxpayers’ money;
• broaden the scope of banks covered;
• enable more effective management of potential failures by authorities; and
• harmonise depositor protection across the EU.  

The Council agreed its negotiating position on the CMDI proposals on 19 June 2024. For more information, see FIG Top 5 at 5 dated 27 June 2024.

Bridging the Gap

It was agreed that failing banks will have access to industry funded safety nets to finance their resolution and eventual exit from the market whereby such funds would be used to supplement a failing bank's own loss-absorption buffers of own funds and convertible liabilities (“MREL”). This process, referred to as the bridge the gap (“BtG”) mechanism, would ensure that losses are, in the first instance, borne by the bank’s shareholders and creditors.

Accordingly, banks with insufficient MREL at the time of resolution, can rely on deposit guarantee schemes (“DGS”) or resolution funds – or in the case of the Banking Union, the Single Resolution Fund (“SRF”) - to finance their resolution without the involvement of depositors. However, in the interests of financial stability, this option is a last resort and access to such funds will be subject to strict conditions, such as the maintenance of sufficient eligible liabilities or capital as set out in their resolution plans at least two years before any intervention.

Public Interest Assessment

A resolution procedure can only be commenced if it is considered to be in the public interest. The new CMDI framework clarifies how the existing public interest assessment (“PIA”) should be conducted by resolution authorities. The Agreement also broadens the criteria whereby resolution can be prioritised over liquidation when it better serves financial stability and depositor protection. 

Hierarchy of Claims

The Agreement does not reflect the European Commission's proposals on the hierarchy of claims under Article 108 of BRRD. Instead, it was agreed that the current preference for the repayment of DGS protected depositors in the first instance, and a second tier for deposits of households and SME depositors not covered by the DGS, would be retained.

Next Steps

The Agreement is subject to formal adoption by the Council and the Parliament, in advance of it coming into force.

2. Council publishes Trilogue negotiating positions on proposed PSD3 and PSR

On 30 June 2025, the European Council (“Council”) published two working documents, both dated 30 June 2025, which detail the respective negotiating positions of the Council, the European Parliament and the European Commission (“Commission”) as regards the Commission’s proposed directive on payment services and electronic money services in the internal market (“PSD3”) and the proposed Payment Services Regulation (“PSR”).

The working documents are as follows:

• working document as regards the proposed PSD3, setting out the Commission proposal, the Parliament’s mandate and the Council’s mandate, in table form; and
• working document regarding the proposed PSR, setting out the Commission proposal, the Parliament’s mandate and the Council’s mandate, in table form.

This latest development follows on from the Council’s agreement as regards the negotiating mandate on PSD3 and PSR, as reported in last week's FIG Top 5 at 5 .

3. Commission adopts delegated regulation on RTS on minimum contents of liquidity management policy procedures for issuers of significant ARTs under MiCA

On 27 June 2025, the European Commission (“Commission”) adopted a Delegated Regulation (“Regulation”) supplementing the regulation on markets in crypto-assets (“MiCA”) with regard to regulatory technical standards (“RTS”) specifying the minimum contents of the liquidity management policy and procedures for certain issuers of asset referenced tokens (“ARTs”) and e-money tokens (“EMTs”).

The European Banking Authority (“EBA”) submitted a final report to the Commission setting out the draft RTS in June 2024. For more information, see FIG Top 5 at 5 dated 20 June 2024.

Under article 45(3) of MiCA, issuers of significant ARTs are required to stablish, maintain and implement a liquidity management policy and procedure.

The draft RTS set out in the Regulation address the following matters:

• policies and procedures for identifying, measuring and managing liquidity risk;
• contingency policy and liquidity risk mitigation tools;
• segregation of the liquidity management policy and procedures; and
• process and procedures to test scenarios of liquidity stress.

The Regulation states that the content of the draft RTS builds on the December 2022 Basel standards on the prudential treatment of crypto-assets exposures and also take account of Article 86 of the CRD on liquidity risk and the EBA guidelines on internal liquidity adequacy assessment process (“ILAAP”) of 3 November 2016, adapted to the crypto-activities of tokens issuers.

Next Steps

The Regulation will enter into force 20 days after its publication in the official journal of the European Union

4. Parliament and Council  reach agreement to change settlement cycle under CSDR

On 18 June 2025, the European Council (“Council”) and the European Parliament (“Parliament”) announced that they had reached a provisional agreement as regards new rules to make transactions in transferable securities more efficient.

This latest development follows on from Coreper’s approval of the Council’s position on the proposed regulation (“Proposed Regulation”) to shorten the settlement cycle to T+1 under the central securities depositories regulation (“CSDR”) in May 2025. For more information, see FIG Top 5 at 5 dated 15 May 2025.

The Proposed Regulation will amend  CSDR by shortening the settlement cycle on securities, such as shares or bonds executed on EU trading venues, from two business days (“T+2”) to one after the trading takes place (“T+1”). For more information, see FIG Top 5 at 5 dated 20 February 2025.

Changes to European Commission’s Proposal

The Council and the Parliament have agreed to exempt certain securities financing transactions (“SFTs”) that are documented as single transactions composed of two linked operations, from the settlement cycle requirement.

ESMA will monitor and report on the settlement efficiency during the transition to T+1, particularly in respect of SFTs traded on or outside trading venues.

Next Steps

The Proposed Regulation is subject to adoption by the Council and the Parliament. Following adoption, it will enter into force 20 days after its publication in the official journal of the European Union. The Proposed Regulation will apply from 11 October 2027.

On 30 June 2025, the European Insurance and Occupational Pensions Authority (“EIOPA”) published a report (“Report”) on biodiversity risk management by insurers.  The Report is the first of its kind and maps current practices and challenges in the identification, measurement, and management of biodiversity risks by (re)insurers as part of the existing Solvency II risk management framework.

Overall, the Report notes promising market practices among (re)insurers. This is in spite of the challenges presented in assessing biodiversity risks due to their complexity and their interconnectedness with other environmental risk factors.

Some of the main findings of the Report are as follows:

• biodiversity risk is often viewed through the lens of reputational risk, with the Report highlighting that conducting a biodiversity risk assessment under Solvency II requires moving beyond treating the risk as a mere potential reputational risk. Accordingly, materiality assessments should be performed with adequate resources;
• most undertakings consider biodiversity to be an important but emerging risk - a “megatrend” that is difficult to translate into concrete financial impacts on insurance activities. The most assumed risk is a potential negative impact on investments, such as a decrease in asset values;
• some undertakings refer to potential biodiversity risks in their sustainability risk plans, but there is limited evidence of the assessment of materiality of biodiversity risk in own risk and solvency assessments (“ORSAs”);
• a number of undertakings have analysed certain investments or underwriting activities, such as in the agriculture or forestry sector, which may be highly impacted by biodiversity risk. Some health-related exposures have also been identified, but they have not yet been further analysed in the ORSA.

Positive Practices

Some of the promising market practices identified by the Report, include: 

• initiatives aimed at  creating risk awareness for biodiversity risks at board level, expressing the need for strategic attention on what undertakings identify as an emerging risk;
• the importance of narratives in underpinning scenarios that capture the complexity of biodiversity risks, including interlinkages between climate and biodiversity, as well as spillover and compounding effects; and 
• industry and stakeholders are undertaking an important number of initiatives to support the identification and management of biodiversity and nature-related risks.

Challenges

The Report also sets out a number of challenges as regards the identification  of the potential materiality of biodiversity risk, some of which are as follows:

• measurement of biodiversity risk is not straightforward, and while some datapoints are available,  they are not easily implemented for financial decision-making purposes by insurers;
• challenges to the integration of biodiversity risk assessment in insurers’ risk management practices make actionable risk assessments difficult. These challenges range from the limited capacity to identify the risks (linked to data limitation), to the complex nature of biodiversity (due to its regional specificities and its interlinkages with other environmental risks, including climate change).

The Report also identified challenges for insurers stemming from:

• the lack of a boundary with climate change risk  - the “climate-biodiversity nexus”; and
• the lack of access to public and corporate data on local biodiversity risks, with  global models and metrics struggling to capture local biodiversity risks. Accordingly, specific regional scenarios may be needed for certain portfolios and regions.

 Action

The Report goes on to highlight areas for action and further engagement to ensure that insurers can further improve on biodiversity-related risk assessment, across the following areas:

• measures aimed at strengthening coordination in the EU among supervisors and policymakers with a view to the identification of targeted action;
• initiatives aimed at addressing the climate-biodiversity nexus; and
• capacity building – with EIOPA stating that it intends to engage in a structured dialogue with supervisors and industry in order to promote a more comprehensive understanding of biodiversity risks and their potential impacts for the insurance industry, such as dedicated workshops to share insights and practices among supervisors, industry, and academia on foot of the Report.

On 1 July 2025, the European Commission (“Commission”) adopted a Delegated Regulation (“Regulation”) supplementing the Capital Requirements Regulation (“CRR”) regarding regulatory technical standards (“RTS”) specifying the method for identifying the main risk driver of a position and for determining whether a transaction represents a long or a short position under articles 94(3), 273a(3) and 325a(2) of the CRR.

Recent Developments

The European Banking Authority published a final report on the matter on 6 December 2024. For more information, see FIG Top 5 at 5 dated 12 December 2024.

The European Council published the trilogue negotiating positions on the CMDI proposals on 24 March 2025. For more information, see FIG Top 5 at 5 dated 27 March 2025.

Contents of Final Draft RTS

The final draft RTS address the following areas:

• the method for identifying the main risk drivers of a non-derivative position;
• the method for determining whether a non-derivative transaction represents a long or a short position in its main risk driver;
• the simplified method for identifying the main risk driver of a non-derivative position and for determining whether the non-derivative transaction represents a long or a short position in its main risk driver;
• the method for identifying the main risk drivers of a derivative position;
• the method for determining whether a derivative transaction represents a long or a short position in its main risk driver; and
• the simplified method for identifying the main risk driver of a derivative position and for determining whether the derivative transaction represents a long or a short position in its main risk driver. 

The Regulation states that the proposed general method to identify the main risk driver hinges on sensitivities defined under the market risk standardised approach (“FRTB-SA”) or on add-ons defined under the standardised approach for counterparty credit risk (“SA-CCR”).

Regarding the determination of the direction of the positions, the Regulation sets out that the methodology is aligned with the one set out in the technical standards developed in accordance with Article 279a(3), point (b) of the CRR.

Additionally, the Regulation states that the simplified methods, referred to above, are applicable as regards relatively simple instruments such as, fixed-rate bonds, floating-rate notes, stocks, forwards, futures, simple swaps and plain vanilla options.

Next Steps

The Regulation will enter into force 20 days following its publication in the official journal of the European Union.

On 27 June 2025, the European Supervisory Authorities (“ESAs”) launched a joint consultation paper (“Consultation”) on draft joint guidelines (“Guidelines”) regarding ESG stress testing under the Capital Requirements Regulation (“CRR”) and the Solvency II Directive (“Solvency II”). 

The draft Guidelines aim to harmonise methodologies and practices among supervisors in banking and insurance, to ensure proportionality and to enhance the effectiveness and efficiency of ESG stress testing.

The Guidelines are addressed to competent authorities and have two stated objectives, as follows:

• improve the legal certainty, clarity and transparency of the supervisory approval process with regard to integrated stress testing of ESG risks; and
• ensure consistency, long-term considerations and common standards for assessment methodologies throughout the EU and across sectors.

Content

The draft Guidelines:

• establish a common framework for developing ESG-related stress testing methodologies and standards across the EU’s financial system;
• provide comprehensive guidance on the design and features of stress tests with ESG elements; and
• provide guidance regarding the organisational and governance arrangements such stress tests would need to have, for example, sufficient human resources with relevant expertise / data collection and management systems that support access to high-quality ESG data / appropriate timelines for scenario analysis.

The Consultation highlights that the draft Guidelines have been drafted in such a way so as to support a consistent, long-term approach to ESG stress testing, while being flexible enough to accommodate further developments in methodology and data availability.

Public Hearing

The ESAs will hold an online public hearing on the draft Guidelines on 26 August 2025.

Next Steps

The Consultation is open for feedback until 19 September 2025. Feedback received will be taken into account in Q3 / Q4 2025, with the ESAs planning to finalise the Guidelines by the end of January 2025 and publish them by 10 January 2025.