In this Issue:-
- European Communities (Statutory Audits) (Directive 2006/46/EC) Regulations 2010
- Extension of the Government Bank Guarantee under the Credit Institutions (Eligible Liabilities Guarantee) Scheme ("ELG Scheme")
- NAMA Update: Changes to the Minimum Threshold
- Statutory Mortgage Arrears Code
- The Consumer Credit Regulations 2010
- CP41 Corporate Governance Code expected to issue in October 2010 ("CP 41")
- New Strategy on Banking Supervision Published
EUROPEAN COMMUNITIES (STATUTORY AUDITS) (DIRECTIVE 2006/46/EC) REGULATIONS 2010
The Minister for Enterprise, Trade and Innovation has published the European Communities (Statutory Audits) (Directive 2006/46/EC) Regulations 2010 (the "Regulations") to give effect to Directive 2006/46/EC on statutory audits.
The Regulations provide for an approval process for statutory auditors. They also provide for the establishment of a public register of auditors, contain detailed provisions with regard to public oversight of statutory auditors and set out provisions regarding the independence of auditors.
Of particular interest are the provisions requiring public-interest entities to establish audit committees. The Regulations also contain provisions in respect of the removal of auditors, the independence of auditors and the disclosure of auditor's remuneration in company accounts. For the purposes of the Regulations "public-interest entities" are defined as:
- companies whose transferable securities are admitted to trading on a regulated market of any Member State (in Ireland this means the Main Securities Market of the Irish Stock Exchange);
- credit institutions; and
- insurance undertakings.
Impact on SPVs with Listed Securities
Special purpose vehicles (SPVs) whose debt securities are listed on a regulated market of an EU Member State would be characterised as a "public-interest entity" for the purposes of the Regulations. However, as set out below, issuers of asset back securities are specifically excluded from the definition.
Exemption for Issuers of ABS
SPVs which, as their sole business, issue "asset-backed securities" (as defined below) may avail of an exemption from the requirement to establish an audit committee under the Regulations.
The definition of "asset-backed securities" is derived from Article 2 (5) of Commission Regulation (EC) No 809/2004 and includes securities which (a) represent an interest in assets, including any rights intended to assure servicing, or the receipt or timeliness of receipts by holders of assets of amounts payable thereunder or (b) are secured by assets and the terms of which provide for payments which relate to payments or reasonable projections of payments calculated by reference to identified or identifiable assets.
An SPV wishing to avail of this exemption must, in accordance with the Regulations, prepare and disclose a statement setting out the reasons why it considers the establishment of an audit committee by it is not appropriate and, accordingly, why it has availed itself of the exemption. Such a statement must be included in any annual report published by it, or in an annual return or other periodic statement delivered by it to a competent authority. We understand that it is expected that Irish audit firms will suggest the form of statement that will be required.
Exemption for Subsidiaries
There is also an exemption for a subsidiary undertaking within the meaning of Article 1 of Directive 83/349/EEC but only if the preceding requirements of the Regulations are complied with by a parent undertaking (within the meaning of that Article) of the first-mentioned undertaking in such a manner as ensures that any statutory audit of the first-mentioned undertaking comes within the purview of the relevant audit committee.
EXTENSION OF THE GOVERNMENT BANK GUARANTEE UNDER THE CREDIT INSTITUTIONS (ELIGIBLE LIABILITIES GUARANTEE) SCHEME ("ELG SCHEME")
The ELG Scheme was introduced in December 2009 to replace the Credit Institutions (Financial Support) Scheme 2008 (the "2008 CIFS Scheme") which expired on 29 September 2010.
The ELG Scheme was established to guarantee specific issuances of eligible debt securities and deposits (as set out below) issued by the participating institutions or, in the case of deposits, placed with the participating institutions during the relevant issuance period, referred to under the ELG Scheme as 'eligible liabilities'.
The issuance period (or window) for the eligible liabilities is the period during which a guaranteed bank deposit can be made with a participating institution or guaranteed debt can be issued by a participating institution.
Following the commencement of SI 470 of 2010 on 29 September 2010, the issuance period of the ELG Scheme will now continue to 31 December 2010 in respect of the full range of eligible liabilities under the Scheme (including corporate deposits and other liabilities of less than three months in duration and interbank deposits which was approved by the EU Commission on the 21 September 2010). The period for retail deposits was already extended to 31 December 2010 at the end of June and has been approved by the EU Commission. In addition, the ELG Scheme rules have also now been updated as of 30 September 2010.
NAMA UPDATE: CHANGES TO THE MINIMUM THRESHOLD
On the 30 September 2010, a number of changes were announced to the way that loans will be transferred to the National Asset Management Agency ("NAMA") from the five participating institutions. A key change was that the total exposure threshold for a debtor's loans to be transferred to NAMA was raised from €5 million to €20 million. This change only applies to Allied Irish Bank and Bank of Ireland and will mean that approximately 650 debtors with property-related debts of between €5m and €20m in these two banks, accounting for €6.6 billion of the aggregate €80 billion of NAMA eligible loans, will remain with these participating institutions.
Going forward it is anticipated that the remaining loans will be transferred to NAMA on an institution by institution basis with the remaining Anglo Irish Bank loan due to transfer by the end of October 2010 and the rest of the loans expected to transfer by year-end.
STATUTORY MORTGAGE ARREARS CODE
The Code of Conduct on Mortgage Arrears ("CCMA") was first introduced on 27 February 2009 to provide additional protections to consumers who are in mortgage arrears and to help ensure that all genuine cases are handled positively and sympathetically by lenders. An amendment was introduced to the CCMA in February 2010 which extended the time lenders must wait before repossessing a property from six months to twelve months. The CCMA applies to all regulated mortgage lenders, except credit unions.
Following the publication of the interim report by the Expert Group on Mortgage Arrears and Personal Debt in July this year, the Central Bank & Financial Services Authority of Ireland has published CP 46: Review of Code of Conduct on Mortgage Arrears, a consultation paper outlining new recommendations to be incorporated into the CCMA together with a draft revised CCMA.
THE CONSUMER CREDIT REGULATIONS 2010
The European Communities (Consumer Credit Agreements) Regulations 2010 S.I. 2010 / 281 (the "Regulations") was transposed into Irish law on 11 June 2010. The Regulations give effect to the provisions of Directive 2008/48/EC on Credit Agreements for Consumers (the "CCD"), the broad aim of which is to harmonise laws governing consumer law across Europe while maintaining high levels of consumer protection.
The Regulations broadly apply to credit agreements offered to "consumers" of more than €200 and less than €75,000. The term "consumer" is defined under the Regulations as "a natural person who is acting, in the course of a transaction to which these Regulations apply, for purposes outside his or her trade, business or profession".
Please feel free to contact any member of our Banking & Capital Markets team for further information in relation to the Regulations and the key provisions thereof.
CP41 CORPORATE GOVERNANCE CODE EXPECTED TO ISSUE IN OCTOBER 2010 ("CP 41")
Further to our update in our Spring Newsletter, It is expected that the Central Bank will issue its Corporate Governance Requirements for Credit Institutions and Insurance Undertakings in final form during October 2010 following the extensive comments on Consultation Paper CP41 earlier this year which created significant debate.
While the Consultation Paper concerned itself with the governance of banks and insurance firms, there were some concerns that it might be extended to cover MiFID investment firms. The Irish Funds Industry Association has separately engaged with the Central Bank regarding the development of a Code of Practice for that industry, which it is expected will be in place by the end of the year.
It is not anticipated that there will be a further round of public consultations prior to final issuance. The Code, once implemented, is likely to have significant implications for both regulated firms and non-executive directors alike including the possible imposition of a ceiling on the number of directorships held by directors of regulated banks and insurance undertakings which could have cost and supply implications for directorships, depending on the application of proportionality.
NEW STRATEGY ON BANKING SUPERVISION PUBLISHED
On 21 June 2010, the Central Bank of Ireland published a new strategy in relation to banking supervision in Ireland. The paper, entitled "Banking Supervision: Our New Approach", outlines how retail, wholesale and international banks will be regulated in Ireland. It highlights the four major items of work which the Central Bank proposes to undertake this year with a view to obtaining a greater understanding of the progress which banks have made in reforming themselves in the aftermath of the financial crisis. It is hoped that this will provide a greater insight into the nature and pace of change in banking practices in the market.
Please feel free to contact any member of our Banking & Capital Markets team for further information in relation to any of the above matters.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.
