KEY THEMES IN FINANCE AND CAPITAL MARKETS
ACTS COMMENCED SINCE THE SPRING HORIZON TRACKER
Air Navigation and Transport Act 2022
Date signed into law: 7 December 2022
This act will facilitate reform of safety and economic regulatory oversight of the aviation sector in Ireland by merging the Safety Regulation side of the Irish Aviation Authority (“IAA”) with the Commission for Aviation Regulation (“CAR”) to create a standalone aviation regulator. The for-profit air navigation side of the IAA will become a separate commercial agency to be known as the Irish Air Navigation Service. It will also amend the regulation of airport charges in Ireland, strengthening regulation, governance and enforcement.
Latest stage: Commenced by SI 741/2022, SI 65/2023, and SI 220/2023.
IRISH PROPOSED LEGISLATION
Air Navigation and Transport (International Aviation Agreements) (Amendment) Bill
This bill has not been published but it is intended to make legal provision for the Beijing Convention 2010 and the Montreal Protocol 2014 in Ireland.
Latest stage: Heads of Bill in preparation.
Companies (Corporate Governance, Enforcement and Regulatory Provisions) Bill 2023
This bill has not been published but it is intended to make legal provision to enhance and strengthen enforcement and regulatory provisions in the Companies Act 2014. It will also permanently provide for the option of virtual meetings along with new provisions relating to receivership. For more information see our Corporate section.
Latest stage: Heads of Bill in preparation.
Miscellaneous Provisions (Transparency and Registration of Limited Partnerships and Business Names) Bill 2023
See Corporate section for further detail.
Personal Insolvency (Amendment) (No.2) Bill
See Insolvency section for further detail.
Co-operatives Societies Bill 2022
This measure aims to establish a new legislative framework for co-operative societies. It will consolidate and reform current provisions and will introduce corporate governance, financial reporting, compliance requirements and requirements in relation to the creation and registration of security similar to those applicable to companies. Entities which register under the new legislation will be required to adhere to the co-operative ethos.
The new regime will:
- simplify the procedure to establish and operate a co-operative society;
- reduce the minimum number of founding members (from seven to three) and expand the categories of founding members to include bodies corporate;
- permit virtual and hybrid participation at general meetings;
- remove the requirement to obtain the consent of the Registrar of Co-Operative Societies and Trade Unions for co-operative societies seeking financing from sources other than bank loans, public bodies or share subscriptions of less than €30,000 in any period of six months;
- require co-operative societies to register certain charges created by it, similar to the registration of security process applicable to companies; and
- give co-operatives certain flexibilities in drafting their governing rules to reflect their requirements.
Latest stage: Report on pre-legislative scrutiny of the general scheme was published on 3 May 2023.
Insights: Co-Operative Societies Bill 2022 From a Financing Perspective.
DEPARTMENT OF FINANCE CONSULTATIONS
Consultation on the transposition of the Credit Servicers’ and Credit Purchasers’ Directive
On 24 January 2023, the Minister for Finance published a public consultation on the transposition of Directive (EU) 2021/2167 ("Credit Servicing Directive") on credit servicers and credit purchasers. The directive entered into force in December 2021 and member states are required to transpose the directive by 29 December 2023.
The purpose of the directive is to promote a secondary market for non-performing loans. The directive:
- lays down a common framework for the sale and management of bank originated non-performing loans which are transferred or sold after 29 December 2023;
- provides for a new EU wide authorisation and regulatory framework for credit servicers to be overseen by national competent authorities;
- permits authorised entities to passport credit servicing activities across the EU; and
- amends the Consumer Credit Directive 2008 and the Mortgage Credit Directive 2014.
The directive contains a number of discretions which can be exercised by member states. The purpose of the consultation is to seek the views of the public on these discretions so as to inform the Minister for Finance’s decisions in transposing the directive.
Latest stage: The consultation is currently being reviewed.
See below for further on the consultation paper issued by the European Banking Authority on its draft guidelines on the assessment of adequate knowledge and experience of the management or administrative organ of credit servicers, as a whole, under the Credit Servicing Directive.
See further commentary on the Credit Servicing Directive here.
EU DRAFT LEGISLATION
EU Green Bond Standard
Procedure reference: 2021/0191 (COD)
Date published: 6 July 2021
As one of the EU’s green finance initiatives, the European Commission proposed a voluntary EU green bond standard ("GBS") under a proposed regulation on European green bonds (the “GB Regulation”) in July 2021. After much back and forth, proposals and counter proposals, a provisional agreement was announced between the Council and the Parliament on 28 February 2023 after the fourth round of trialogue negotiations.
The following are some of the key features of the provisional text:
(a) The "European green bond" or "EuGB" designation remains a voluntary one allowing an issuer to use such designation (i) for bonds for which an EU Prospectus Regulation prospectus has been published or (ii) where such issuer is an EU or third country sovereign issuer.
(b) All proceeds of GBS-compliant bonds will need to be invested in economic activities that are aligned with the EU taxonomy, provided the sectors concerned are already covered by it. For those sectors not yet covered by the EU taxonomy and for certain very specific activities there will be a "flexibility pocket" of 15%. This will allow the GBS to be used from the outset.
(c) Certain transparency and disclosure requirements have also been included. Issuers must:
- complete a European green bond factsheet, prior to issuing a GBS-compliant bond, which must have been subject to a pre-issuance review with a positive opinion by an external reviewer;
- provide an annual allocation report demonstrating that the proceeds of such bond have been allocated in accordance with the requirements under the GBS. This is required until all proceeds have been allocated and such report should be reviewed by an external reviewer;
- following the full allocation of the proceeds of such bonds and at least once during the lifetime of the bond, publish an impact report on the environmental impact of the use of the bond proceeds.
All of the above information must be published on the issuer's website and such publication notified to European Securities and Markets Authority ("ESMA") within 30 days.
(d) Guidelines will be published by the European Commission for voluntary pre-issuance disclosures for issuers of bonds marketed as environmentally sustainable and sustainability linked bonds.
(e) A registration and supervisory regime will be established with responsibility for the registration and ongoing supervision of external reviewers of GBS-compliant bonds. This regime will fall within ESMA's responsibility. While this regime is being established, an 18 month transitional period will apply.
Latest stage: A provisionally agreed text was published on 10 May 2023 and sent for formal ratification by both the Council of the European Union and the European Parliament. It is hoped that it will be adopted relatively quickly, given the trialogue negotiations which have already taken place. Once it is approved, it will begin to apply 12 months after it enters into force.
For further information please see our commentary on the EU Green Bonds Standard.
Proposal for a Regulation amending Regulations (EU) No 648/2012, (EU) No 575/2013 and (EU) 2017/1131 as regards measures to mitigate excessive exposures to third-country central counterparties and improve the efficiency of Union clearing markets
Procedure reference: 2022/0403 (COD)
Date published: 7 December 2022
This proposal forms part of an overall series of proposed measures published by the European Commission on 7 December 2022 to further develop the EU's Capital Markets Union. While the title of the regulation suggests a focus on central clearing, the proposal extends beyond clearing and makes a number of other amendments to the European Market Infrastructure Regulation (EU) 648/2012 ("EMIR") as part of a broader review of EMIR known colloquially as “EMIR 3.0”.
Proposed amendments to EMIR include (i) requiring firms subject to the clearing obligation to clear at least a certain proportion of the services identified as of substantial systemic importance through active accounts at EU central counterparties ("CCPs") and to report on such clearing and (ii) the removal of the equivalence decision condition in order to benefit from the intragroup clearing and margin exemptions and its replacement with a list of third countries for which an exemption should not be granted. Other proposed changes include amendments to the way CCPs are authorised and monitored on an ongoing basis and the recognition of third country CCPs.
Latest stage: First reading in the Council
Proposal for a Regulation on the Law Applicable to the Third-Party Effects of Assignments of Claims
Procedure reference: 2018/0044 (COD)
Date published: 12 March 2018
This regulation proposes to set down uniform rules on the ownership of claims and securities in cross-border transactions. It seeks to designate which national law will designate the ownership of a claim after it has been assigned on a cross-border basis. It forms part of the legislative package to establish the Capital Markets Union with the aim that legal certainty will promote cross-border investment, access to cheaper credit and market integration.
Latest stage: First reading in European Parliament and Council.
EU DIRECTIVES AWAITING IMPLEMENTATION
Directive (EU) 2021/2167 of the European Parliament and of the Council of 24 November 2021 on credit servicers and credit purchasers and amending Directives 2008/48/EC and 2014/17/EU (the "Credit Servicing Directive")
See above under Department of Finance Consultations.
See further commentary on the Credit Servicing Directive here.
Directive (EU) 2023/958 of the European Parliament and of the Council of 10 May 2023 amending Directive 2003/87/EC as regards aviation’s contribution to the Union’s economy-wide emission reduction target and the appropriate implementation of a global market-based measure ("Aviation Emissions' Directive")
Data published: 16 May 2023
The implementation of the Aviation Emissions' Directive is another important step in the adoption of the European Commission's "Fit for 55" legislative package to deliver the European Green Deal (the EU's long-term growth strategy to make Europe climate-neutral by 2050). The objective is to revise the EU Emissions Trading System ("EU ETS") in respect of aviation emissions in a cost-effective and coherent way in line with the European Union's increased climate target, while taking into account the need for a just transition and the need for all sectors to contribute to the EU climate efforts. The main legal amendments are:
- to consolidate the total quantity of aviation allowances at current levels, and apply the linear reduction factor in accordance with Article 9 of the ETS Directive;
- to increase auctioning of aviation allowances;
- to continue intra-European application of the EU ETS while applying CORSIA (Carbon Offset and Reduction Scheme for International Aviation) as appropriate to extra-European flights; and
- to ensure that airlines are treated equally on the same routes with regard to their obligations with economic impacts.
Transposition date: 31 December 2023
EUROPEAN BANKING AUTHORITY CONSULTATIONS
Consultation on draft EBA Guidelines on the assessment of adequate knowledge and experience of the management or administrative organ of credit servicers, as a whole, under Directive (EU) 2021/2167 (EBA/CP/2023/07) ("Credit Servicing Directive")
On 19 April 2023, the European Banking Authority ("EBA") launched a public consultation on its draft guidelines on the assessment of adequate knowledge and experience of the management or administrative organ of credit servicers, as a whole, under the Credit Servicing Directive. The guidelines aim at ensuring that the organs are suitable to conduct the business of the credit servicer in a competent and responsible manner.
The guidelines specify the criteria for the assessment of the organs’ collective knowledge and experience, which will be performed based on the individual members assessment by credit servicers, taking into account the principle of proportionality. The guidelines set out the main requirements of the credit servicers assessment process, including good repute, and specify when such an assessment has to be performed. Where short comings are identified, the credit servicer must take appropriate corrective measures, including e.g. to provide induction and training or to replace members of the management body.
The consultation runs until 19 July 2023.
Consultation on draft guidelines on the STS criteria for on-balance-sheet securitisation under Article 26a(2) of Regulation (EU) 2017/2402 of the European Parliament and the Council (EBA/CP/2023/09)
At the end of April 2023, the European Banking Authority ("EBA") launched a public consultation on its draft guidelines on the criteria for on-balance-sheet securitisations ("STS Criteria"). On-balance-sheet securitisations are now eligible for preferential risk-weighted treatment under the Capital Requirements Regulation. The draft guidelines provide a harmonised interpretation and clarify aspects with a potential level of ambiguity, ensuring a harmonised understanding of the STS Criteria along with a harmonised implementation in terms of capital requirements. The EBA were also conscious of ensuring consistency with existing guidelines for traditional securitisations.
The consultation period will run until 7 July 2023.
LOAN MARKET ASSOCIATION
On 4 May 2023, the Loan Market Association (the "LMA") published model provisions for sustainability-linked loans ("SLL").
These model provisions look to provide a proposed form of draft SLL provisions for inserting into LMA loan documentation, which are aligned with the LMA's Sustainability-Linked Loan Principles and accompanying guidance notes. The model provisions were put together by an experienced working party of financial institutions and law firms active in sustainable finance. They seek to reflect current market practice while providing a vital tool to protect the integrity of the SLL market by providing a basic drafting framework to assist parties in the negotiation of the document.
LINKS TO OTHER RELEVANT DEVELOPMENTS
Corporate
Please see this section for the following relevant directive and bills.
- Companies (Administrative, Governance & Insolvency Amendment) Bill
- Miscellaneous Provisions (Transparency and Registration of Limited Partnerships and Business Names) Bill 2023
- Co-operatives Societies Bill 2022
Tax
Please see this section for the following relevant proposal.
Financial Services Regulation
Please see this section for the following relevant proposals:
- Proposal for a Directive on consumer credits
- Proposal for a Regulation on Markets in Crypto-assets
- Proposal for a Directive on Distance Marketing of Consumer Financial Services
- Proposal to amend the Capital Requirements Directive
- Proposal to amend the Capital Requirements Regulation