News Update Financial Regulatory

Data mobility, prevention of financial crime, and qualifying holding procedures
10 October 2022

In this News Update, we discuss the AFM and DNB's Discussion Paper on data mobility, DNB's Report on supervisory activities and policy on banks' role in the prevention of financial crime, and the ECB's consultation on its draft Guide on qualifying holding procedures. We further highlight some other financial regulatory publications issued since our last News Update.  

AFM and DNB | Discussion Paper on data mobility

Since data and data mobility are having a growing impact on financial services, the way in which relevant data is shared with and accessed by financial institutions is being scrutinised by the Dutch financial supervisors the Dutch Central Bank (De Nederlandsche Bank, "DNB") and the Dutch Authority for the Financial Markets ("AFM"). In this context, the AFM and DNB have published the Discussion Paper 'Data Mobility and the Financial Sector', laying down their preliminary policy vision for data mobility in the financial sector.

AFM and DNB envisage a policy enabling trusted, innovation-enhancing and equitable data mobility, which will help mitigate market failures and enhance the proper functioning of data markets. This policy vision applies to data mobility policy initiatives that have a significant impact on financial services and on the AFM's and DNB's mandates, including the sharing of financial data ("Open Finance") and of relevant non-financial data.

The AFM and DNB identify three core policy priorities for financial policymakers: (i) safeguarding the interests of data holders, (ii) enabling data-related innovation, and (iii) creating a level data playing field. To this end, the financial supervisors propose three key policy actions for policymakers:

  • To design Open Finance in a way that safeguards data holders’ interests, enables financial innovation and enhances the level data playing field across financial entities;
  • To contribute to the development of cross-sectoral data mobility and data sharing in the medium to long term; and
  • To consider making datasets the policymakers control available to financial entities.

The rather jargon-heavy paper is sometimes not very clear on who should get access to what. Grey areas include whether banks or credit institutions should be able to access and use datasets of shopping websites or the tax authorities, and whether shopping websites providing certain financial services should be able to get relevant information from banks or public authorities. Another issue is which data of banks, payment services providers or others should be funnelled automatically to DNB and/or the AFM or to other public authorities. Specifics would help in assessing the high level paper's impact, but would no doubt raise concerns from financial institutions as data providers (e.g. regarding whether they can legitimately refuse to share data with public authorities, or whether doing so would lead to negative externalities). Similarly, it is unclear whether clients' right to refuse data sharing would lead to negative externalities (e.g. their access to financial services being restricted, or their options to buy products being limited), or whether it would merely produce results similar to those generated by refusing non-essential cookies.

The Discussion Paper contains a set of discussion questions on which stakeholders are invited to provide their views before 11 November 2022.

DNB | Report on supervisory activities and policy on banks' role in the prevention of financial crime

In its report 'From recovery to balance', DNB takes the view that a more risk-based approach in monitoring compliance with the Act on the Prevention of Money Laundering and Terrorist Financing (Wet ter voorkoming van witwassen en financieren van terrorisme, "Wwft") will sharpen the focus of efforts to keep the financial sector free from financial crime.

In recent years, DNB has identified serious Wwft compliance shortcomings in the financial sector. Various institutions are engaged in remediation processes to restore compliance, which has entailed substantial costs for the financial (especially banking and payment) sector. DNB has received some pushback due to the perceived heavy burden imposed on financial institutions, with limited scope to innovate and little room for manoeuvre. There is also limited feedback on the effectiveness of DNB's approach in keeping the sector free from crime, bearing in mind the minimal follow-up capacity of the Financial Intelligence Unit and the public authorities. This paper appears to be a welcome attempt to address some of the concerns.

DNB is of the opinion that, to achieve a more risk-based approach, banks must first improve their customer risk classification processes. More limited scrutiny of low-risk customers will allow greater capacity and attention to be focused on higher-risk customers. For its part, DNB plans to assist institutions in various ways, including providing additional guidance on levels of scrutiny that are appropriate for low-risk customers. In addition, technologically innovative solutions can be used more broadly, in consultation with the legislature, to sharpen the focus of the fight against money laundering. Furthermore, there are initiatives to strengthen the effectiveness of the chain of parties involved in combating money laundering. According to DNB, the key is more robust coordination and prioritisation between stakeholders, including working together to improve the reporting of unusual transactions by focusing on transactions that are in fact suspicious, rather than solely unusual. DNB's view reflects concerns that institutions overreact to supervision, which results in public authorities being swamped with notifications, and in various legitimate market participants being denied access to essential financial services. Unsurprisingly, if the authorities incentivise institutions to be strict, they will be.

DNB has announced that a series of roundtable sessions with representatives from the financial sector and other stakeholders will be held in the coming months. The sessions will discuss the main bottlenecks and areas where additional guidance can help pave the way forward. 

ECB | Consultation on draft Guide to qualifying holding procedures

The European Central Bank ("ECB") has launched a public consultation on its draft Guide on qualifying holding procedures. The Guide aims to clarify how the ECB assesses applications to acquire qualifying holdings in banks within the boundaries of the Capital Requirements Directive ("CRD", as implemented with potential gold-plating in the various Member States) and the 2016 EBA Joint Guidelines on the prudential assessment of acquisitions. The ECB intends the Guide to function as a user-friendly handbook. It sets out who is obliged to undergo qualifying holding assessments, what documentation is required for the assessments, and how the ECB assesses the transactions in question. The Guide also provides information on complex acquisition structures, the application of the principle of proportionality and specific procedural elements.

The purpose of the Guide is to increase transparency towards market participants by explaining the ECB’s supervisory practice when assessing the acquisition of qualifying holdings. It attempts to build on the applicable legal framework and on experience gained by the ECB over the years in assessing this type of transaction. This Guide will supplement the ECB’s Guide on the supervisory approach to the consolidation in the banking sector, as the two guides have a complementary focus. Please note that ECB guides have the same status as Q&As and other non-binding statements or summaries provided by supervisors; they do not constitute legislation, nor do they have the legal authority of Guidelines of the European Banking Authority. As a practical add-on, the draft Guide does provide input on the ECB's interpretation of the EU directive provisions and the Single Supervisory Mechanism framework, which should help the framework's constituent supervisors to apply national laws implementing the CRD.

The consultation period for the draft ECB Guide ends on 9 November 2022.

Other financial regulatory publications

We have highlighted a selection of other publications by legislatures and regulators for the financial markets and financial supervision since our September 2022 News Update.

Ministry of Finance
  • Decree implementing directives for investment firms and UCITS on sustainability risks and sustainability factors (Besluit implementatie richtlijnen voor beleggingsondernemingen en icbe’s inzake duurzaamheidsrisico’s en duurzaamheidsfactoren, only in Dutch) entered into force on 8 September 2022, except for some parts, which enter into force on 22 November 2022;
  • Amended Trust Offices Supervision Regulations 2018 (wijziging Regeling toezicht trustkantoren 2018, only in Dutch) effective 1 October 2022;
  • Consultation on the Implementation Decree on accessibility rules for banking services (Implementatiebesluit toegankelijkheidsvoorschriften bankdiensten, only in Dutch).

AFM
  • Report on Complaint survey of insurance providers for the year 2021 (Rapport Klachtenuitvraag bij aanbieders van verzekeringen over het jaar 2021, only in Dutch);
  • Signals monitor first half of 2022 (Signalenmonitor eerste halfjaar 2022, only in Dutch);
  • News item 'Notional mortgage interest rate for fourth quarter 5%' (Toetsrente hypotheken voor vierde kwartaal 5%, only in Dutch).

DNB
  • Q&A on sanctions screening for (incoming and outgoing) crypto transactions;
  • News item on sanctions screening;
  • News item 'DNB maintains the Countercyclical Capital Buffer at 1 percent'.

European Supervisory Authorities
  • Final Report on draft Regulatory Technical Standards ("RTS") regarding fossil gas and nuclear energy investments;
  • Report on risks and vulnerabilities in the EU financial system.

European Banking Authority
  • Final Report on transferability Guidelines;
  • Final draft RTS on performance-related triggers in STS on-balance-sheet securitisations;
  • Report on Basel III Monitoring;
  • Annual Funding Plans Report;
  • Analysis of the EU dependence on non-EU banks and of EU banks’ dependence on funding in foreign currency;
  • Work Programme 2023.

European Insurance and Occupational Pensions Authority

European Securities and Markets Authority
  • Final Report on Guidelines on certain aspects of the MiFID II suitability requirements;
  • Updated Q&As on the European crowdfunding service providers for business Regulation, the Market Abuse Regulation, MiFID II and MiFIR commodity derivatives topics, and MiFID II and MiFIR market structures topics;
  • Public statement reminding investment firms to consider inflation and inflation risk when applying relevant MiFID II requirements in the interest of investor protection.

If you have any financial regulatory questions, please do not hesitate to contact Berry van Wijk and Roel Theissen. For questions related to Investment Management, you can also contact our colleagues Oscar van Angeren and Marthe Bollen.
Written by:
Berry van Wijk

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