The EU Directive on Restructuring and Insolvency and the Strengthening of the Creditor’s Role in the Course of Restructuring Procedures
In view of the adverse economic consequences of the COVID-19 pandemic that are expected, it comes just in time that EU Member States must implement (most of) the Directive (EU) 2019/1023 on restructuring and insolvency (Restructuring Directive) until July 2021 (with an extension option for up to one year). The Restructuring Directive establishes uniform rules for preventive restructuring frameworks that aim at avoiding (the stigma of) insolvency proceedings.
Preventive restructurings enable debtors in financial difficulties to avoid insolvency proceedings and to continue their businesses on the basis of an agreed restructuring plan. The adoption of that restructuring plan requires the vote of the majority (usually 75%) of affected creditors. Member States have started working on transposing the Restructuring Directive into national laws since 2019. Whereas in some Member States preventive restructuring frameworks have already been in in place since quite a time, most Member States are required to create a completely new legal framework for preventive restructurings.
You can find more information on Restructuring Directive here.
New Regulation on Cash Controls
The European Commission has published materials for an information campaign related to the application of the new Regulation (EU) 2018/1672, which refers to the application of the new rules on cash control, which will be fully applied from 3 June 2021 in the Member States.
Regulation (EU) 2018/1672 on controls of cash entering or leaving the Union and repealing Regulation (EC) No 882/2004 1889/2005, which is fully applicable from 3 June 2021, will improve the cash control system, as the new EU legislation reflects the novelties provided by international standards for the prevention of money laundering and terrorist financing of the Working Group on Financial Measures – FATF -a.
The new regulation includes banknotes and coins in the definition of cash (including currency that is no longer in circulation but can still be exchanged at the central bank); checks, traveller’s checks, debentures or money orders not bearing the name of the user and coins with a gold content of at least 90% and levers, beads or lumps with a gold content of at least 99.5%.
EBA launches action plan to crack down on “de-risking” protocols in financial institutions
The European Banking Authority (EBA) recently published three regulatory instruments to address de-risking practices based on evidence gathered in its call for input. The instruments clarify that compliance with anti-money and countering terrorist financing (AML/CTF) obligations in EU law does not require financial institutions to refuse, or terminate, business relationships with entire categories of customers that they consider to present a higher ML/TF risk. In these documents the EBA also set out steps that financial institutions and competent authorities should take to manage risks associated with individual business relationships in an effective manner.
In the first of this three-pronged approach, the EBA has published its 2021 Opinion on ML/TF risks in the EU financial sector. The document was issued as part of the EBA’s “new mandate to lead, coordinate and monitor the fight against ML/TF in the financial system at EU level”.
The EBA has concluded that the process of “de-risking” may prove detrimental to the financial services industry, as “customers affected by de-risking may resort to alternative payment channels in the EU or elsewhere to meet their financial needs”, and warned that “transactions may no longer be monitored”, thus “making the detection and reporting of suspicious transactions, and, ultimately, the prevention of ML/TF more difficult”.
In a statement, the EBA also said it will “continue to monitor and assess the scale and impact of, as well as the reasons for, de-risking, and consider the extent to which the current legal and regulatory framework is sufficient to address the issues associated with de-risking”.