On 10 April 2025, the Central Bank of Ireland (“Central Bank”) launched a consultation (“CP 160”) on revisions to its Fitness and Probity (“F&P”) Regime.  CP 160 comes on foot of the recommendations made in the Enria report, following Mr Andrea Enria’s independent review of the Central Bank’s F&P assessment process, the results of which were published in July 2024. For more information on the Enria report, see FIG Top 5 at 5 dated 18 July 2024

Structure

In line with recommendations made by the Enria Report, the Central Bank is consolidating all the guidance into a single document and, in addition, is introducing a number of enhancements to its existing Guidance on the F&P Standards (“Revised Guidance”). The Revised Guidance provides a clear, transparent and comprehensive articulation of the overall framework for the assessment of F&P of relevant roles.

Chaper 2 of CP 160 addresses the recommendations for increased clarity and transparency of supervisory expectations in relation to the application of the Central Bank’s F&P Standards.

CP 160 also includes a review of the list of prescribed pre-approval controlled functions (“PCFs”), which is set out in chapter 3.

Chapter 4 contains the questions that the Central Bank are particularly interested in receiving responses to.

The draft Revised Guidance is appended to CP 160.

Revised Guidance on the Standards of F&P

Since the introduction of the F&P regime in 2011, the Central Bank has published various supplementary materials to aid understanding of the application of the standards and the operation of the F&P regime, for example, FAQs and “Dear CEO letters”. As per the recommendation in the Enria Report, the Central Bank is consolidating all of this guidance into a single document, and as mentioned above, is also introducing some enhancements to the existing F&P guidance.

In the Revised Guidance, the Central Bank has stated that it proposes to ensure industry understanding of the F&P process by addressing the following:

• the identification and incorporation of high level expectations in respect of objective measures regarding:
  • inherent responsibilities, and role summaries, of certain PCFs – the inherent responsibilities are those that are in the Senior Executive Accountability Regime (“SEAR”) Regulations.

    In CP 160, the Central Bank highlights the importance it attaches to the role of the board, and of non-executive directors (“NEDs”) and independent non-executive directors (“INEDs”), emphasising, specifically the integral nature of INEDs as a fundamental safeguard within a firm’s governance framework. In this context, CP 160 provides additional clarity regarding the Central Bank’s minimum expectations as regards those role holders. CP 160 also sets out a summary of the role of NEDs and INEDs and provides additional clarity as regards the definition of independence.

  • time commitments of specific PCFs - the Revised Guidance sets out the Central Bank’s expectations in relation to time commitments and is based on applicable corporate governance requirements. In the case of sectors where such requirements are not directly applicable, CP 160 states that the Revised Guidance reflects the Central Bank’s view that such requirements constitute best practice, and so, are relevant for application to individuals in such sectors in a proportionate manner.
  • level of experience required for specific PCFs – the Revised Guidance does not stipulate a minimum number of years’ experience for any given role (expect for head of actuarial function). However, the Revised Guidance does include high level expectations regarding specific roles, noting that the European Central Bank has set thresholds for the presumption of sufficient experience for the CEO, Chair and board members (executive and non-executive) which apply in the case of the banking sector.

    Chapter 4 of the Revised Guidance contains a benchmark for other regulated firms that can be used as a guide, acknowledging that for smaller, less complex firms shorter periods may be considered appropriate.

  • level of knowledge / qualifications required for specific PCFs – in cases where specific qualifications are required or thought to be beneficial to a certain role, these qualifications are included in the Revised Guidance.

   

• Conflict of Interest

  The Revised Guidance clarifies the expectations of the Central Bank as regards the assessment of conflicts of interests. The Central Bank states that the existence of a conflict of interest does not necessarily preclude an individual from acting in a particular role, asserting that conflicts of interest should be assessed on a case-by-case basis.

• Collective suitability, diversity and inclusion

  CP 160 highlights that the board of a regulated entity must possess adequate collective knowledge and diversity of skills and experiences, such that the board can provide efficient and effective oversight. The Revised Guidance reaffirms the importance that the Central Bank attaches to the collective suitability of boards and to diversify within the collective suitability of the board. Further, the Revised Guidance emphasises that collective suitability of the board is the responsibility of regulated firms.

  Finally, the Revised Guidance states that diversity of the board is not a criterion for the assessment of an individual’s F&P but should be taken into account when selecting and assessing members of the board in the context of collective suitability.

Relevance of past events to an application

The Revised Guidance proposes that it is sufficient for firms not to investigate beyond a period of ten years, except in cases where a custodial sentence may gave been imposed, and also where no other facts exist that may raise concerns as to an individual’s F&P.

Changes to the list of PCFs

In CP 160, the Central Bank states its agreement with the recommendation in the Enria Report that the overall number of PCF roles should be reconsidered together with a possible adjustment in the approach to different industry sectors.

Accordingly, CP 160 sets out that the Central Bank is committed to a substantive review of PCF roles, while also ensuring that the level of Central Bank gatekeeping is appropriately calibrated. CP 160 then goes on to state that because of the fact that the current list of PCFs is embedded in SEAR, it is not appropriate to change the list of PCFs in SEAR so soon after its introduction. The Central Bank will, instead, take a two stage approach to its review of the overall number of PCF roles, as follows:

• in the first instance, an initial targeted review of the PCF list – CP 160 proposes an initial restructure of the PCF Regulations in order to make the PCF list more manageable and clearer for firms. Specifically, it is proposed to remove the sector specific categorisations such that there will be one list applicable to all regulated firms (except for credit unions).

  This restructure has resulted in a number of roles merging and the renaming of certain functions. It has also reduced the number of PCF roles from 59 to 45. The proposed revised list is set out in an annex to CP 160.

  In CP 160, the Central Bank highlights that this restructuring of the PCF list will not necessitate the appointment of new PCFs by regulated firms. However, it is stated that there will be cases whereby a role that was previously categorised for pre-approval only for certain industry sectors, now becomes applicable to other sectors. When this occurs, CP 160 states that the Central Bank will apply its in-situ process for any individuals occupying such a role at the time of the amendments to the PCF list. New appointments to any such role will be subject to the PCF approval process.

  Further, the Central Bank has stated that it will outline, in advance,  any related changes to processes following the completion of the consultation. It is the Central Bank’s stated intention that the restructuring of the PCF list will not impact existing approvals, or applications in process.

• secondly, the Central Bank proposes to carry out work over the course of 2025 and 2026 on a more substantive review, to align with the planned three year review of SEAR in 2027.

Implementation Report

On 10 April 2025, the Central Bank also published an implementation report setting out the progress made on the implementation of the 12 recommendations made in the Enria report. Some of the matters highlighted are as follows:

• the establishment of a dedicated F&P unit – for more information, see FIG Top 5 at 5 dated 9 January 2025; and
• the creation of a gatekeeping decisions committee to consider cases of potential refusal.

F&P Gatekeeper Process Manual

In addition to the publications set out above, the Central Bank has also published an F&P Gatekeeper Process Manual (“Manual”). The Manual clarifies each stage of the F&P process, including the engagement that regulated firms and proposed appointees can expect from the Central Bank, in terms of notification of interviews, interview length, time to process applications and availability of feedback.

The Manual reiterates and emphasises the Central Bank’s expectations of the financial services sector, including its primary role in the F&P process and the  proportionate due diligence that should be completed by regulated entities prior to submitting fitness and probity applications to the Central Bank.

Next Steps

The Central Bank is seeking feedback on the proposals set out in CP 160, specifically, as mentioned above, the questions set out in chapter 4. Feedback / comments are to be submitted to CP160@centralbank.ie before 10 July 2025. 

On 9 April 2025, the Central Bank of Ireland (“Central Bank”) published a blog post (“Post”) by Gabriel Makhlouf, Governor of the Central Bank. The theme of the Post centred around the payments infrastructure, its evolution, and the need to harness the benefits that innovations in the payments landscape can offer.

European Payments Landscape

The Governor noted that there are frictions in the European payments landscape whereby there is no digital payment method that fulfils all user needs.

Noting the dominance of global card payments providers in the shift towards digital payments, Governor Makhlouf pointed to the fact that this dominance is significant given the critical nature of the payments infrastructure. The Governor highlighted that it is the Central Bank’s responsibility, in cooperation with European partners, to harness the benefits of innovations but cautioned that the preservation of monetary and financial stability must be to the fore.

The Governor considered central bank digital currencies (“CBDC”) and their role in the digital transformation in the payments sector, particularly noting their potential to preserve the role of the central banks in offering a safe means of payment. The Governor stated that the public payments infrastructure that needs to be built to facilitate a digital euro would fill the gaps in the current fragmented infrastructure and additionally, would foster innovation and competition in European payments.

The Governor went on to express his firm belief that the lack of a unified pan-European payment method, that does not rely on foreign providers, is a key vulnerability for the euro area, further stating that recent geopolitical tensions have reinforced this belief.

Retail Level Fragmentation

Governor Makhlouf pointed out that it has been 30 years since the inception of the single market and, still, most European retail payment solutions are national in scope and address limited use cases. The Governor expressed his support for the contention in the Draghi report that completing the single market and strengthening the single market would allow Europe to develop and operate digital payments independently. He further endorsed the Letta report, which called for an advance in the implementation of the digital euro such that the EU’s financial autonomy would be strengthened and the retail payment infrastructure improved.

The Governor stated that a digital euro, as a complement to cash, would make for a more cohesive, competitive, innovative and resilient payments system.

Wholesale Level Fragmentation

The Governor discussed the fact that a financial market infrastructure (“FMI”) is required to conduct its settlements in central bank money where practical and available, nothing this as particularly relevant for the settlement of wholesale financial transactions, as they are usually of high value. He highlighted that the Eurosystem must offer a solution in this area, particularly to avoid the risk that central bank money settlement could be replaced by more risky settlement assets on private FMIs. 

The Governor pointed to the recent work carried out by the Eurosystem that explored the use of wholesale central bank money settlement with distributed ledger technology (“DLT”) and stated that the ECB’s governing council will:

• develop and implement a safe and efficient platform for such settlements in central bank money; and
• look into a more integrated, long-term solution for settling DLT-based transactions in central bank money, including international operations such as foreign exchange settlement.

Global Fragmentation

Governor Makhlouf highlighted that developing technologies offer an opportunity to harmonise cross border payments, ensuring international interoperability and avoiding domestic or network based initiatives becoming isolated “digital islands”. In this regard, the Governor noted the key objectives of the G20 cross border payment programme, particularly as regards enhancing cross-border payments' speed and transparency, increasing access to cross-border payment services and reducing their costs.

Public and Private Cooperation

Recognising the key role that central banks play in the payments landscape, the Governor highlighted the importance of partnership with other public agencies and private sector participants, such that respective experience can be leveraged and further fragmentation avoided. Governor Makhlouf stated: “We want to see innovation and encourage it, and make sure it is in keeping with our core objectives of monetary and financial stability, enabling opportunities to be realised while ensuring risks are well managed.”

Conclusion

Governor Makhlouf reiterated that the digital euro and a wholesale CBDC should be adopted. He emphasised that we need an effective European owned digital payment solution, noting that Europe cannot afford to stand still in this area. If we do, he noted the potential that public money might not play the critical role that it does now with the entire system affected by “forces that do not have any public good objective.”

On 15 April 2025, the European Commission (“Commission”) launched a targeted consultation (“Consultation”) on the integration of EU capital markets under its savings and investments union (“SIU”) strategy. For more information on the SIU, see FIG Top 5 at 5 dated 27 March 2025. 

In the Consultation document, the Commission notes that there are various barriers preventing the full integration, and hindering the efficiency of, EU capital markets stemming from legal, regulatory, technological, and operational practices.

The Commission also highlights that differences in supervisory practices can also be a barrier to capital market integration owing to the fact that financial market participants, operating across borders, must manage different requirements across the single market. The cumulative effect of such barriers and obstacles is that financial market participants are prevented from benefiting from economies of scale and operational efficiency with the ultimate effect being that costs are increased and the availability of financial services to businesses and citizens is restricted.

Accordingly, the Consultation aims to gather feedback on such obstacles to capital markets integration across the EU with the Commission emphasising that the Consultation is a crucial step as regards the implementation of the SIU, ultimately enhancing financial opportunities and boosting economic competitiveness.

Specifically, the Consultation seeks feedback on:

• barriers in general to the integration and modernisation of trading and post-trading infrastructures, the distribution of funds across the EU and efficient cross-border operations of asset management; and
• barriers specifically linked to supervision - respondents are invited to indicate any areas in which regulatory simplification would be appropriate.

In view of the comprehensive nature of this consultation, the Commission has divided it into six key topics:

• simplification;
• trading;
• post trading;
• horizontal barriers to trading and post-trading;
• asset management; and
• funds and supervision.

The Commission state that this approach aims to streamline the response process and ensure each aspect is thoroughly addressed, thereby making it more manageable for respondents to engage with and contribute their insights effectively.

Next Steps

The Commission is interested in the views of a wide range of stakeholders. The Consultation is open for feedback until 10 June 2025. The Commission has stated that insights gathered on foot of the Consultation will be used as regards the development of measures that will be presented in a comprehensive package in Q4 2025. 

1. ESMA publishes final report on RTS on investment firms’ order execution policies under MiFID II

On 10 April 2025, the European Securities and Markets Authority (“ESMA”) published a final report (“Report”) containing draft regulatory technical standards (“RTS”), explaining how investment firms should establish their order execution policies and assess their effectiveness, under the markets in financial instructions directive (“MiFID II”).

The draft RTS aim to enhance investment firms’ order execution and foster investor protection.

The draft RTS are set out in an annex to the Report and cover the following matters:

• the general criteria to be taken into account in establishing an order execution policy (article 2);
• the selection of execution venues for the order execution policy (article 3);
• order routing criteria (article 4);
• client instruction (article 5);
• dealing on own account when executing client orders (article 6);
• monitoring of the order execution policy (article 7);
• the periodic assessment of the effectiveness of the order execution policy (article 8); and
• identification of classes of financial instruments (article 9).

Next Steps

ESMA has submitted the draft RTS to the European Commission, which has three months to decide whether to endorse the RTS or not.

2. ESMA publishes technical advice to Commission on amendments to MiFID II research provisions in context of Listing Act

On  9 April 2025, the European Securities and Markets Authority (“ESMA”) published a report (“Report”) containing its technical advice to the European Commission (“Commission”) on the amendments to the research provisions in the MiFID II Delegated Directive in the context of the Listing Act.

Background

On 6 June 2024, ESMA received a request from the Commission for technical advice on the implementation of the amendments to the Prospectus Regulation, Market Abuse Regulation and MiFID II Delegated Directive in the context of the Listing Act.

On 28 October 2024, ESMA published a consultation paper (“Consultation”) on the draft technical advice in order to explain the rationale of its proposals and gather input from stakeholders. For more information, see FIG Top 5 at 5 dated 31 October 2024.

Report

The advice in the Report focuses on the changes in MiFID II related to the payment for research and execution services.

The Report summarises and analyses feedback received during the Consultation period, setting out how the feedback, together with advice from the Securities and Markets Stakeholders Group (“SMSG”), have been taken into account. ESMA advises that the Report be read in conjunction with the Consultation.

Annex IV of the Report contains a mark up showing the proposed amendments to article 13 of MiFID II which includes amendments to align it with the new payment option offered under the Listing Act, which allows for joint payments for execution services and research, irrespective of the market capitalisation of the issuers covered by the research.

3. ESMA publishes report with RTS on systemic internaliser notification, single volume cap and circuit breakers

On 10 April 2025, the European Securities and Markets Authority (“ESMA”) published a final report (“Report”) containing three sets of draft technical standards as part of the review of the market in financial instruments regulation (“MiFIR”). 

The Report contains proposals in respect of the following:

• New implementing technical standards (“ITS”) for the notification of investment firms acting as systematic internalisers (“SIs”) to competent authorities – these are considered in section three of the Report. The template that is to be used as regards notification is also included;
• An amendment of the existing regulatory technical standards (“RTS”) on the volume cap and on transparency calculations and – the RTS reflect the change from double to single volume cap introduced by the MiFIR review, together with the upcoming use of transaction reporting data for transparency calculations.

  The phasing out of daily reporting requirements for data flowing into the financial instruments transparency system  (“FITRS”) and double volume cap (“DVC”) systems has been confirmed by ESMA, representing a significant contribution to the reduction in the reporting burden; and

• A recast of the RTS specifying organisational requirements for trading venues in order to integrate the new empowerment on circuit breakers and reflecting the changes on foot of DORA – the RTS include new provisions related to the establishments of circuit breakers and targeted amendments to provisions previously included in the existing RTS, which have been revised due to the entry into application of the DORA framework.

Next Steps

ESMA submitted the Report to the European Commission (“Commission”) on 10 April 2025. The Commission now has three months to decide whether to endorse the proposed amendments to the RTS and the proposed ITS.

1. EIOPA publishes costs and past performance report

On 15 April 2025, the European Insurance and Occupational Pensions Authority (“EIOPA”) published its costs and past performance report (“Report”). The Report provides an overview of the past performance and costs of retail investment products within the remit of EIOPA for the period 31 December 2019 to 31 December 2023.

The Report covers investment-based insurance products (“IBIPs”) and pension products. For the purposes of this update, the focus is on IBIPS.

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

• in 2023 IBIPs delivered positive net returns, which the Report notes, was driven by the recovery of financial markets. Overall, and due to this recovery, IBIPs achieved positive net returns over the four years, but did not manage to keep pace with recent high inflation;
• recent high inflation did not lead to a marked increase in IBIPs costs, nevertheless, such costs remain high which, in turn, limits the potential value of some products;
• the value of IBIPs is highly dependent on the risk profile of the product and consumers’ overall investment objectives. The Report emphasises that this means that consumers who seek higher yields and are willing to accept risks can potentially receive better returns and consequently, more value. On the other hand, consumers with less of an appetite for risk may find better value in profit participation products as they show lower costs and higher net returns than pure unit-linked products with low risk;
• disparities in costs and net returns are observed across member states, including at times when comparing cross-border and domestic products in some markets – evidencing that the benefits of the EU single market have not yet been fully realised;
• equity funds with ESG features delivered better returns than those without ESG features, underlining that the trend towards sustainable investing continued to gain momentum in 2023;
• as regards distribution channels, the Report found that banks are the primary distributors of IBIPs with brokers and agents having a notable presence and, in some cases, a leading role in certain member states.
  

2. IAIS publishes Application Paper on supervision of climate related risks in the insurance sector

On 16 April 2025, the International Association of Insurance Supervisors (“IAIS”) published its application paper on the supervision of climate related risks in the insurance sector (“Paper”).

The Paper highlights the financial risks associated with climate change and climate related risks and their potential to impact on the financial resilience of individual insurers, together with financial stability.

In this context, the Paper emphasises the importance of insurance supervisors having a strong understanding of the type of climate related risks, and the insurance industry’s exposure to such risks, specifically as regards their supervisory responsibilities.

The Paper aims to support supervisors regarding their efforts to integrate climate related risks in their supervision of the insurance sector, together with the promotion of a globally consistent approach to addressing climate related risks. The IAIS have stated that this should strengthen the resilience of the global insurance sector.

The Paper provides relevant supporting material regarding the IAIS insurance core pronciples (“ICPs”) as to how the ICPs may be implemented.

The Paper sets out good practices and guidance for supervisors in certain areas, some of which  are as follows:

• qualitative and quantitative considerations related to insurers’ corporate governance, risk management, valuation and investments;
• supervisory reporting and public disclosure;
• supervisory issues related to group supervision and macroprudential supervision;
• scenario analysis; and
• market conduct-related issues.

The Paper goes on to make key recommendations related to the topics listed above.

Next Steps