We review three key developments during the last year that had a considerable bearing on the operations and businesses of our clients in the Financial Services sector. We also identify two emerging areas of focus for the coming year and the one top tip for 2021. A common thread across a number of articles is the move from a face-to-face FS Sector to a remote and virtual FS Sector.
Three important developments in 2020
1. Social housing – financing and investment trends
Debt financing for the purposes of constructing or acquiring social housing is a relatively recent trend. Ireland’s social housing sector had traditionally been financed by local authority receipts, government grants and exchequer funding. 2020 saw a significant increase in the volume of transactions, notwithstanding the complications arising from COVID-19.
For more on this topic, read:
Social Housing - Financing and Investment Trends
Social Housing, the Residential Tenancies Acts and COVID-19
2. NPLs and the capital markets response to COVID-19
Resolving non-performing loans continued to feature in the Financial Services sector in 2020. While Ireland continues to deal with the legacy of the financial crisis, moves also began in Europe to facilitate a more streamlined and transparent market in advance of the expected next wave of challenged loans.
These developments are consistent with the European Commission’s view that securitisation is a useful tool for enhancing the Financial Services sector’s capacity to support economic recovery.
For more on this topic, read:
Financial Services Update: The European Commission’s Strategy for Post COVID-19 NPLs
How Will Irish Banks Deal With the Increase in Non-Performing Loans Post COVID-19?
Combatting COVID-19 with Securitisation: the European Commission’s Proposal
Capital Markets – Shaping an Appropriate Response to COVID-19
3. Debt servicing and managing cash
The unexpected and unrelenting impact of COVID-19 on cash flows and debt servicing was the biggest challenge for entities in the Financial Services space in 2020. From the onset of the pandemic, we shone a spotlight on a number of aspects of this theme.
We provided information through articles and webinars as to how to avoid certain pitfalls as well as exploring how restructures, of various types, are worth exploring.
For more on this topic, read:
Examinership – Not Negotiating First Carries Real Risk
Survival for Businesses Significantly Affected by COVID-19
Creditors – Time to Re-open, Recover and Re-ignite Your Business
Two familiar themes in 2021
1. Crypto currency regulation
Two measures will fundamentally change the status of cryptocurrencies in Ireland in 2021 and beyond. The Criminal Justice (Money Laundering and Terrorist Financing) (Amendment) Bill 2020 will bring previously unregulated virtual asset service providers and custodian wallet providers into the scope of AML regulation. Virtual currency providers and online wallet providers in Ireland should now consider their AML obligations and put measures in place to comply with these in advance of the enactment of the 2020 Bill.
The European Commission Digital Finance Package proposes to create a legislative framework for crypto assets. As this proposal progresses, consumer and investor protection, as well as market integrity will be to the forefront of the debate and stakeholders should keep a close eye on the development of the legislation, but also the political discourse accompanying it.
For more on this topic, read:
An End to Cryptic Crypto Regulation?
Virtual Currencies in the Spotlight
2. Managing Digital Risks and Managing Resilience in Financial Services
As part of the European Commission’s Digital Finance Strategy initiative to build a ‘digital ready’ Europe, the Commission recently published proposed legislation on digital operational resilience for the EU Financial Services sector, known as DORA. The objective is to implement a cohesive regulatory framework in the EU financial services sector to manage digital risks and build resilience against IT related disruptions, threats and cyberattacks.
For more on this topic, see:
DORA: Europe’s Proposed Law on Digital Risks in the Financial Sector
Webinar: Fintech & the Future of Finance
One key recommendation for the coming year
Not OOO, but WFH
The trend to remote working as a permanent feature of the economy is here to stay and represents one of the key considerations for the Financial Services sector as we continue in 2021. The National Remote Work Strategy will introduce new laws that will enshrine a new way of working.
Already, there is increased digital adoption in the FS Sector, from trading, to retail banking, to deal making. COVID-19 has proven that a lot of work can be undertaken away from the office, without impacting customer experience or transaction efficacy. This trend will bring further focus and scrutiny to security and data privacy considerations, as well as impacting on practical aspects of deal-making and public registration requirements. It is a theme that we visited on occasion in 2020 and we expect it to dominate a lot of strategy and business plans for sector participants in 2021 and beyond.
At the earliest opportunity this year, we recommend that businesses:
- Update work and security policies
- Review back to work policies and protocols
- Review leases, outsourcing contracts, digital platforms
For more, see:
Webinar: In-House Counsel Masterclass: Data Privacy in 2021
COVID-19: Working from Home and the Right to Disconnect
Privacy and Security: The Risks of Working From Home
For more information on successfully navigating related issues for your business in 2021, contact a member of our Financial Services team.
The content of this article is provided for information purposes only and does not constitute legal or other advice.
