The European Council (Council) reached an agreement on a common member states’ position on a new law intended to improve cooperation between national data protection authorities. The General Data Protection Regulation (GDPR) harmonizes data protection rights across Europe and applies to any organization that deals with personal data of EU citizens or residents, regardless of where they are based. To better facilitate GDPR enforcement this new law will require national data protection authorities to cooperate quickly when a data protection case concerns cross-border processing.

Once adopted, the regulation will provide tools for quickly handling the complaints filed by citizens or organizations. It also clarifies procedural deadlines and specific steps of an investigation, including the process for the adoption of a binding opinion by the European Data Protection Board (EDPB).

The Council will next begin negotiations with the European Parliament to agree on the final legislative text. Click here to learn more.

The European Council (Council) adopted new rules aimed at making financial institutions operating in the EU more resilient to possible economic shocks. The changes are intended to strengthen their supervision and risk management as well as sustainability in the banking sector. The new rules update the capital requirements regulation and directive that translate the Basel III standards into EU legislation.

The reforms added an “output floor” feature that limits the risk of excessive reductions in financial institutions’ capital requirements. The reforms also set a transitional regime for crypto assets and amendments to enhance the management of Environmental, Social and Governance (ESG) risks.

This is the last step of the adoption procedure. The amended capital requirements regulation and capital requirements directive will be published in the EU’s Official Journal. Member states will have 18 months to implement the directive into national legislation. The regulation changes will apply beginning January 1, 2025. Click here for more information.

On May 21, 2024, the European Council announced its approval of the Artificial Intelligence or AI Act, to set a global standard AI regulation through a risk-based approach. “The new law aims to foster the development and uptake of safe and trustworthy AI systems across the EU’s single market by both private and public actors.” The AI Act provides classification of AI systems based on risk, with lower risk systems being subject to light transparency obligations and high-risk systems subject to more requirements and obligations. AI that is capable of cognitive behavioural manipulation, social scoring, and the use of AI for predictive policing based on biometric data that categorize people based on race, religion, or sexual orientation will be banned in the EU. An AI Office in the European Commission, scientific panel, and an AI Board with member states’ representatives will be implemented as governing bodies to ensure enforcement.

More information on the AI Act is available here.

On February 28, 2023, the European Council and European Parliament reached a provisional agreement on the creation of European Green Bonds (EuGB) as another step in its strategy to finance sustainable growth and “transition to a climate-neutral, resource-efficient economy”. It must be adopted by both institutions for finalization and will apply 12 months after it is entered into force. The green bonds will help issuers substantiate that the green projects they are funding are legitimate and supported by the EU taxonomy, as well as to reduce greenwashing. National competent authorities of each member state will supervise the issuance of green bonds.

In addition to a registration system for the green bonds, a supervisory framework, and voluntary disclosure requirements, “This regulation lays down uniform requirements for issuers of bonds that wish to use the designation ‘European green bond’ or ‘EuGB’ for their environmentally sustainable bonds that are aligned with the EU taxonomy and made available to investors globally.” All proceeds will be invested in economic activities under the EU taxonomy. For sectors that are not covered by the taxonomy, specific activities will be subject to a 15% flexibility pocket.

More information on the green bonds provisional agreement is available here. 

On November 8, 2022, the European Council reached a decision on its general approach to Basel III regulatory reforms, namely proposals on amendments to the capital requirements directive (CRD) and the capital requirements regulation (CRR). The Council hopes that by implementing these reforms, it will “boost the resilience of banks operating in the Union and strengthen their supervision and risk management”.

The “output floor” which uses internal models to calculate minimum capital requirements, will apply to both individual and group banking levels, however, member states will have discretion, within its own country, to apply the output floor at the highest level of consolidation. In addition to enhanced technical improvements to credit and market risk and several other improvements, the Council’s position on the implementation of Basel III reforms will enhance proportionality rules for small banks, specifically for disclosure requirements as they pertain to small and non-complex financial institutions. The European Commission previously presented its proposal on the review of the CRD and CRR regulations on October 27, 2021-- next steps include negotiations with the European Parliament to finalize a version of the texts and finalizing the implementation of Basel III international agreements into EU law.

More information on the European Council’s position on the proposals amending the CRD and CRR , is available here.

On June 30, 2022, the European Parliament and the European Council Presidency reached a provisional agreement on the markets in crypto-assets (MiCA) proposal. The proposal encompasses unbacked crypto-assets issuers, stablecoins, trading venues and crypto-asset wallets. Although national-level regulators have already begun to implement crypto-asset legislation, it is the first time that crypto-assets, crypto-assets issuers and crypto-asset service providers are all under a regulatory framework at the EU level.

The goal of MiCA is to protect consumers from investment risks such as fraud, market manipulation, and insider dealing, as well as hold crypto-asset service providers liable for loss. MiCA also requires relevant crypto-asset players to “declare information on their environmental and climate footprint”, and as a follow up, in two years “the European Commission will have to provide a report on the environmental impact of crypto-assets and the introduction of mandatory minimum sustainability standards for consensus mechanisms, including the proof-of-work.” MiCA further requires a public register of non-compliant crypto-asset service providers to be maintained by the European Banking Authority (EBA). Listed providers with parent companies in high-risk areas for money laundering, as well non-cooperative jurisdictions for tax purposes, are subject to additional checks within the EU AML framework. MiCA also has additional requirements related to stablecoins, non-fungible tokens (NFTs), and crypto-asset service providers (CASPs) authorizations.

The Council and Parliament will need to approve the provisional agreement before in enters a formal adoption procedure. More information on the provisional agreement on MiCA is available here.

On June 29, 2022, the European Council Presidency and the European Parliament reached a provisional agreement and extended the of the scope of a proposal by way of  the "travel rule", which updates transfer of fund rules to include transfer of crypto assets. The rule aims to, “…ensure financial transparency on exchanges in crypto-assets and will provide the EU with a solid and proportional framework that complies with the most demanding international standards on the exchange of crypto-assets, in particular recommendations 15 and 16 of the Financial Action Task Force (FATF), the global money laundering and terrorist financing watchdog.”

The proposal hopes to hold service providers of crypto assets responsible for collecting and providing access to information pertaining to the originators and beneficiaries of those crypto asset transfers in an effort to expand “traceability” as a means to identify and block suspicious transactions, specifically related ML/TF risks. Under the agreement, the GDPR’s data protection rules will continue to apply to the transfer of crypto assets as well as existing sanctions that apply to all natural and legal persons. The provision must undergo confirmation by both the Council and the Parliament before it can be formally adopted.

More information on the provisional agreement is available here.

On May 11, 2022, the European Council adopted its position on the 2030 Policy Programme “Path to the Digital Decade’, which is designed to “strengthen the EU’s digital leadership” through inclusive and sustainable digital policies. Once the European Parliament has confirmed its position, negotiations between Parliament and Council presidency can take place.

The objective of the mandate endeavors to create “concrete digital targets, including for industry which the Union as a whole must achieve by the end of the decade and a novel form of governance with the member states, through a mechanism of cooperation between the Commission and the member states to ensure that the Union jointly achieves its ambition.” The Council contributed a legal basis to the mandate by adding, with respect to governance, that member states and the Commission must cooperate biennially, but the ‘State of the Digital Decade’ report will remain an annual release. The Council also underscored its accord with the Commission Communication of March 2021 on the 2030 Digital Compass, highlighting the importance of fundamental rights.

More information on the 2030 policy program ‘Path to the Digital Decade’, is available here.

On May 16, 2022, the European Council approved the Data Governance Act, “to promote the availability of data and build a trustworthy environment to facilitate their use for research and the creation of innovative new services and products.” The Act aims to create a system where the reuse of specific public-sector data categories (trade secrets, personal data and data protected by intellectual property rights), are protected to safeguard privacy and confidentiality. This act accompanies the 2019 Open Data Directive, which covers other data categories including but not limited to material held by ministries, state agencies, municipalities, and organizations largely funded by or under the control of public authorities, i.e., meteorological institutes. A single access point consisting of a searchable electronic register of public-sector data will be made available by the European Commission. The Act further intends to implement a framework for data intermediation services via a digital services platform to provide a secure data sharing network for individuals and companies; simplify voluntary data availability for the common good or “objectives of general interest” (i.e. medical research projects), through a national register; and create safeguards for personal data.

More information on the Data Governance Act is available here.

The European Council’s position on a proposal to create regulation supporting European Green Bonds was given the go ahead by EU permanent representatives as part of the EU’s objective to “implement its strategy on financing sustainable growth and the transition to a climate-neutral, resource-efficient economy.” The next steps involve negotiations with Parliament to establish a final version of the text. Issuers of the European Green Bond (EuGB), which are environmentally sustainable bonds, will be subject to uniform requirements when issuing these bonds to investors within the European Union. The regulation will further establishes a registration system and supervisory framework for EU green bonds that are reviewed outside of the Union.

More information on the Council's proposal for European Green Bonds is available here.

The European Council amended the scope of the non-financial reporting directive (NFRD), which was proposed by the European Commission, in order to alleviate overburdensome reporting requirements for listed SMEs, and also giving SMEs time to adapt to the new rules. The objective of Commission’s proposal is intended to focus on deficits within the existing rules related to disclosure of non-financial information which the Commission not only believes will prevent a necessary transition to a sustainable economy, but “…was of insufficient quality and comparability to allow it to be properly taken into account by investors.” The Commission will adopt, by delegated act, a definition of sustainability reporting standards, thereby harmonizing sustainability data. The directive will be adopted subsequent technical advice given by certain European agencies and the European Financial Reporting Advisory Group (EFRAG).

More information on NFRD updates is available here.

On February 24, 2022, the European Council adopted its position on a corporate sustainability reporting directive (CSRD), a proposal drafted by the European Commission, that will correspond with the European sustainable finance strategy. The Commission’s proposal is revision of the non-financial reporting directive from 2014, and “will increase a company’s accountability, prevent divergent national standards and ease the transition to a sustainable economy.”

According to the Minister for Economic Affairs, Finance and Recovery, Bruno Le Maire, after prompting from the French Presidency, the adoption is a step towards a European regulatory framework for sustainable finance. He stated that, “…companies with more than 250 employees or listed companies will now have to translate their environmental, social and governance policy into standardised, justified and certified information documents. This means greater transparency for citizens, consumers and investors so that businesses can play their full part in society. This is the end of greenwashing. Today, Europe is setting the rigorous non-financial reference standards of tomorrow, in line with our environmental and social ambitions.”

The proposal includes:

• an extension of the scope to all large companies and companies listed on a regulated market (except listed micro-companies)
• a certification requirement for sustainability reporting
• more detailed and standardised requirements on the information to be published by companies
• improved accessibility of information, by requiring its publication in a dedicated section of company management reports

More information on the Council’s adoption of the CSRD is available here.

On March 22, 2021, the European Council adopted conclusions on the European cybersecurity strategy in their Draft Council conclusions on the EU’s Cybersecurity Strategy for the Digital Decade, which was presented by the European Commission. The Council’s aim is to create a framework that will: protect citizens and businesses from cyber threats, secure information systems and cyberspace, create strategic autonomy and an open economy, all of which will conceivably establish “a resilient, green and digital Europe.” Further, the Council urges the Commission and the High Representative to institute a detailed implementation plan.

Some of the Council’s action items include:

• the plans to create a network of security operation centres across the EU to monitor and anticipate signals of attacks on networks
• the definition of a joint cyber unit which would provide clear focus to the EU's cybersecurity crisis management framework
• its strong commitment to applying and swiftly completing the implementation of the EU 5G toolbox measures and to continuing efforts made to guarantee the security of 5G networks and the development of future network generations
• the need for a joint effort to accelerate the uptake of key internet security standards, as they are instrumental to increase the overall level of security and openness of the global internet while increasing the competitiveness of the EU industry
• the need to support the development of strong encryption as a means of protecting fundamental rights and digital security, while at the same time ensuring the ability of law enforcement and judicial authorities to exercise their powers both online and offline
• increasing the effectiveness and the efficiency of the cyber diplomacy toolbox giving special attention to preventing and countering cyberattacks with systemic effects that might affect supply chains, critical infrastructure and essential services, democratic institutions and processes and undermine economic security
• the proposal on the possible establishment of a cyber intelligence working group to strengthen EU INTCEN's dedicated capacity in this domain
• the importance of strengthening cooperation with international organisations and partner countries in order to advance the shared understanding of the cyber threat landscape
• the proposal to develop an EU external cyber capacity building agenda to increase cyber resilience and capacities worldwide

More information on the Council's adopted conclusions on cybersecurity can be found here.

On March 22, 2021, the European Council adopted conclusions on the retail payments strategy for the EU presented by the European Commission in efforts to develop the retail payments market in the EU; and “make it easier for consumers to pay in shops, and to make e-commerce transactions widely available, convenient and safe across the EU”. Improving instant payments and innovation in retail payments, as well as creating EU-wide payment solutions to decrease outside dependency are key objectives the Council hopes to address.

The Council conclusions on the Commission Communication on a ‘Retail Payments Strategy for the European Union’, details priorities under four ‘pillars’ for strategic action:

• addressing issues related to increasingly digital and instant payment solutions
• innovation and competitiveness issues
• ensuring access to and interoperability of retail payment systems and other support infrastructures
• improving payments with countries outside the EU

The Council also acknowledged challenges to addressing market regulation and development as it pertains to financial inclusion, security and consumer protection, data protection and anti‑money laundering aspects. 

More information on the Council's adopted conclusions on retail payments strategy can be found here.

Communication from the Commission to the European Parliament, the Council, the European Economic and Social Committee and the Committee of the Regions on a Retail Payments Strategy for the EU, can be found here.  

The European Council (Council) adopted a regulation establishing a EU-wide common classification system “to encourage private investment in sustainable growth and contribute to a climate neutral economy”; and the Council hopes to establish this taxonomy by the end of 2021. The taxonomy aims to give investors and businesses a way to identify environmentally sustainable economic activities through common language. The EU has a 2050 target to become climate neutral and a 2030 goal to reach Paris agreement targets, and the taxonomy is expected to help achieve these goals by empowering investors to adjust their investments to “more sustainable technologies and businesses”.

Eventually, a framework will be implemented based on six environmental objectives set up for the European Union, as follows:

1) climate change mitigation;
2) climate change adaptation;
3) sustainable use and protection of water and marine resources;
4) transition to a circular economy;
5) pollution prevention and control;
6) protection and restauration of biodiversity and ecosystems.

The press release on the sustainable finance taxonomy can be viewed here.

Finland’s presidency of the European Council and Parliament reached a preliminary political agreement on a crowdfunding framework, which upon finalization of the technical work, will be submitted to the EU ambassadors for endorsement. The framework was constructed to make it easier for crowdfunding platforms to operate on a cross-border basis “by harmonising the minimum requirements when operation in their home market and other EU countries", as well as the implementation of investor protection rules that aim to improve legal certainty while considering compliance costs for providers.  The preliminary framework agreement will encompass crowdfunding campaigns up to EUR 5 million over a 12-month period. The prospectus regulation and MiFID will regulate the larger crowdfunding operations, however, crowdfunding supported by reward and/or donations are not within the scope of the framework.

“The text sets outs common prudential, information and transparency requirements. It also includes specific requirements for non-sophisticated investors. At the same time, the rules for EU crowdfunding businesses will be tailored depending on whether they provide their funding in the form of a loan or an investment (through shares and bonds issued by the company that raises funds).”

WOCCU will continue to monitor this issue as it is submitted for endorsement to the EU ambassadors and the proposed regulation is adopted. Additional information on the Presidency and Parliaments’ preliminary crowdfunding rules can be found here.

The European Council (The Council) adopted anti-money laundering and counter terrorism financing conclusions in response to their 2019-2024 strategic agenda aimed at strengthening terrorism and cross border crime preventions, and improving cooperation and information sharing. The “Council urges for the swift transposition of all AML legislation into national law and for the strengthening of their effective implementation.” Furthermore, The Council has invited the European Commission (EC) to take action on the existing AML regulatory framework by considering:

• “ways of ensuring a more robust and effective cooperation between the relevant authorities and bodies involved in anti-money laundering and terrorist financing, including through addressing impediments on exchange of information between them;
• whether some aspects could be better addressed through a regulation;
• possibilities, advantages and disadvantages of conferring certain supervisory responsibilities and powers to an EU body.”

WOCCU will continue to monitor The Council and the EC’s AML/CFT regulatory enhancements and any action or input the EC may provide. The “Council conclusions on strategic priorities on anti-money laundering and countering the financing of terrorism”, can be found here.

On October 10, 2019, the Council of the EU's Economic and Financial Affairs Council (ECOFIN), met to discuss key issues including anti money laundering matters and reforms. The Economic and Financial Affairs Council is set to adopt conclusions on the implementation of the anti-money laundering (AML) action plan that was presented last December. The Commission, in addressing shortcomings of the current AML policies, is pushing agreed upon reforms including: the 5th revision of the AML directive; new CRD5 capital requirements for banks and the revised European system of financial supervision; enhancing the cooperation and exchange of information between competent authorities; and further harmonizing AML rules by converting the current AML directive into concrete regulations, in addition to giving an EU body specific AML supervisory tasks.

The 5^th directive on AML and terrorist financing compels the identification of third country jurisdictions with strategic deficiencies in the management of anti-money laundering and counterterrorist financing regimes, and that pose significant threats to the EU financial system. Accordingly, Ministers discussed a methodology for constructing this list and plan to release a new draft list in the form of a delegated act. The “Commission non-paper on key elements of a refined methodology for identifying high-risk third countries for AML purposes” can be found here.  WOCCU and ENCU will monitor these issues closely as they move to the process to determine any adverse impact on credit unions.

The European Union (EU) Ambassadors have confirmed a political agreement between the presidency and the European Parliament to amend the EU rules to prevent money laundering and terrorist financing. This is part of the trilogue process and will now move to the Parliament and Council for adoption.

The draft directive is intended to prevent the use of the financial system for the funding of criminal activities, and to strengthen transparency rules to prevent the large-scale concealment of funds

The main changes to directive 2015/849 include the following:

1. Enhanced access to beneficial ownership registers, so as to improve transparency in the ownership of companies and trusts. The registers will be interconnected to facilitate cooperation between member states with public access to beneficial ownership information on companies; access to beneficial ownership information on trusts and similar arrangements based on a “legitimate interest”; access upon written request to beneficial ownership information on trusts that own a company that is not incorporated in the EU. Member states can provide for greater access.
2. The threshold for identifying the holders of prepaid cards is lowered from €250 to €150, and customer verification requirements are extended. Virtual currency exchange platforms and custodian wallet providers will have to apply customer due diligence controls, ending the anonymity associated with such exchanges;
3. Improved cooperation between the member states' financial intelligence units. FIUs will have access to information in centralised bank and payment account registers, enabling them to identify account holders;
4. Improved checks on risky third countries. The Commission has established and regularly updates a harmonised list of non-EU countries with deficiencies in their anti-money laundering prevention regimes. Additional due diligence measures will be required for financial flows from these countries. The list builds on that established at international level by the Financial Action Task Force.

WOCCU has been active in shaping these regulations to ensure that the credit union perspective is adequately considered.  Namely, the following comment letters were filed during the process that served as a precursor to these amendments to the directive:

• FATF Information Sharing Guidance Comment Letter (July 31, 2017)
• Information Sharing, Correspondent Banking, and Financial Inclusion-Related Customer Due Diligence (April 14, 2017)
• Technical Questions for Banks on Correspondent Banking and Money or Value Transfer Service (MVTS) Operators (November 23, 2015)
• Draft Guidance for a Risk-Based Approach: Money or Value Transfer Services (December 11, 2015)
• FATF Draft Guidance on a Risk-Based Approach to Prepaid Cards, Mobile Payments and Internet-Based Payment Services (April 29, 2013)
• FATF Guidance on Anti-money Laundering and Terrorist Financing Measures and Financial Inclusion (July 5, 2012)

A copy of the press release, together with supporting documents, can be viewed here.

The Council of the European Union, as the final result of the trilogue process adopted two legislative acts on banking:

1. a directive on the ranking of unsecured debt instruments in insolvency proceedings (bank creditor hierarchy); and
2. a regulation on transitional arrangements to phase in the regulatory capital impact of the IFRS 9 international accounting standard.

The general points of the directive on the ranking of unsecured debt instruments are as follows:

• It creates a new class of subordinated debt in banks' insolvency hierarchy which would be eligible to meet the internationally agreed TLAC standard for global banks
• It provides a rapid transposition in to national legal systems, by January 1, 2019 at the latest
• Contains grandfathering provisions to allow existing national systems and already issued debt instruments still to be valid where they fulfil the conditions

With respect to the phase-in of IFRS 9, its new impairment model may lead to an increase in expected credit loss provisioning and consequential fall in capital ratios.  The original proposal contained a 3-year transitional period, however, at the urging of WOCCU, the impact was mitigated to a 5-year transitional period.  In addition, transitional arrangements will ease the effects of an abrupt end to the exemption currently enjoyed by large exposures.