Author: Selwyn Manning

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The EBA consults on draft Guidelines on recovery plans for issuers of asset-referenced tokens and e-money tokens under MiCAR

Source: European Banking Authority

The European Banking Authority (EBA) today launched a consultation on draft Guidelines on recovery plans to be drafted by issuers of asset-referenced tokens (ARTs) and e-money tokens (EMTs). These draft Guidelines set out the requirements with respect to the format of the recovery plans and the information to be included therein. This consultation together with other consultations papers published today form part of the third batch of MiCAR policy products. The consultation runs until 8 February 2024.
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The EBA consults on draft technical standards on own funds requirements and stress testing of issuers under MiCAR

Source: European Banking Authority

The European Banking Authority (EBA) today a launched two consultations on draft Regulatory Technical Standards (RTS) on own funds requirements and stress testing of issuers under the Markets in Crypto-Assets Regulation (MiCAR) which form part of the prudential package of MiCAR products. The first RTS specify the adjustment of own funds requirements and stress testing of issuers of asset-referenced tokens and e-money tokens. The second RTS specify the procedure and timeframe to adjust its own funds requirements for issuers of significant asset-referenced tokens or of e-money tokens.  These consultations, together with other consultations papers published today, form part of the third batch of MiCAR policy products. The consultations run until 8 February 2024.

The draft RTS on the adjustment of own funds requirements and design of stress testing programmes for issuers specify: i) the criteria for the assessment of  ‘higher degree of risk’, ii)  the procedure for competent authorities to determine the period of time considered appropriate for issuers to increase the own funds amount to the higher own funds requirements and the measures to be taken to ensure the timely compliance thereof and iii) a minimum set of requirements to issuers for the design and implementation of their stress-testing programmes.

The mentioned requirements apply to issuers of asset-reference tokens (ARTs) subject to own funds requirements as well as to electronic money institutions issuing e-money tokens (EMTs) that are significant under MiCAR and can be expanded to e-money institutions issuing EMTs that are not significant if the competent authority of the home Member State requires it.

While other draft RTS specify the procedure and timeframe for issuers to adjust their own funds requirements to 3% of the average amount of the reserve assets when their ARTs are classified as ‘significant’ ARTs.

Consultation process

Comments on the consultation paper can be sent by clicking on the “send your comments” button on the EBA’s consultation page. The deadline for the submission of comments is 8 February 2024. 

These consultation papers form part of the prudential package of MiCAR products, for which the EBA will hold a hybrid public hearing on 30 January from 10:00 to 16:00 CET. The EBA invites interested stakeholders to register using this link by 23 January 2024 at 16:00 CET. The dial-in details will be communicated to those who have registered to virtually attend the meeting.

All received contributions will be published following the end of the consultation, unless requested otherwise. 

Legal basis

The EBA has developed these draft RTSs in accordance with Article 35(6) of Regulation (EU) 2023/1114 on Markets in Crypto-assets (MiCAR) and in close cooperation with the European Securities and Markets Authority (ESMA) and the European Central Bank (ECB), which mandates the Authority to further specify the procedure and timeframe for issuers to adjust to higher own funds requirements, the criteria for requiring a higher amount of own funds and develop the minimum requirements for the design of stress testing programmes and in accordance with Article 45(7)(c) of MiCAR and in close cooperation with the European Securities and Markets Authority (ESMA), which mandates the Authority to specify the procedure and timeframe for an issuer of a ‘significant’ token to adjust the amount of its own funds.

Background

MiCAR establishes a regime for the regulation and supervision of crypto-asset issuance and crypto-asset service provision in the European Union (EU). It came into force on 29 June 2023, and the provisions relating to ARTs will be applicable from 30 June 2024.

Among the activities within the scope of MiCAR are the activities of offering to the public or seeking admission to trading of ARTs and EMTs and issuing such tokens. Supervision tasks are conferred on the EBA for ARTs and EMTs that are determined by the EBA to be significant. Additionally, the EBA is mandated to develop 17 technical standards and guidelines under MiCAR to further specify the requirements for ARTs and EMTs, and an additional 3 mandates jointly with ESMA (and, in one case, also with EIOPA).

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The EBA consults on draft regulatory technical standards on liquidity requirements and on draft Guidelines on liquidity stress testing of relevant issuers of tokens, under MiCAR

Source: European Banking Authority

The European Banking Authority (EBA) today launched three consultations on draft Regulatory Technical Standards (RTS) to specify the liquidity requirements of the reserve of assets, the highly liquid financial instruments in the reserve of assets and the minimum content of the liquidity management policy and procedures of relevant issuers of tokens. Furthermore, the EBA consulted on draft Guidelines to establish the common reference parameters of the stress test scenarios to be included in their liquidity stress testing. These consultations form part of the prudential package of MiCAR deliverables and make up the third batch of MiCAR policy products. The consultations run until 8 February 2024.
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EBA releases the technical package for phase 3 of its 3.3 reporting framework

Source: European Banking Authority

EBA releases the technical package for phase 3 of its 3.3 reporting framework

30 October 2023

The European Banking Authority (EBA) today published the technical package for phase 3 of version 3.3 of its reporting framework. This provides the standard specifications that include the validation rules, the Data Point Model (DPM) and the XBRL taxonomies to support the new reporting on Interest Rate Risk in the Banking Book (IRRBB).

This technical package will be first used in the ad-hoc data collection for the banks under the QIS (Quantitative Impact Study) with reference date 31 December 2023, in line with the BoS decision EBA BS 2023 514. In the future, this technical package will also be used for the Implementing Technical Standards (ITS) on supervisory reporting concerning IRRBB, currently being adopted by the European Commission (Reporting framework v3.4).

The  DPM Query Tool has also been updated to reflect the current release. 

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Links

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The EBA issues Opinion on a measure to address macroprudential risk following a notification by the Swedish Financial Supervisory Authority

Source: European Banking Authority

The EBA issues Opinion on a measure to address macroprudential risk following a notification by the Swedish Financial Supervisory Authority

26 October 2023

The European Banking Authority (EBA) today published an Opinion following the notification by the Swedish Financial Supervisory Authority, Finansinspektionen, of its intention to extend for another two-year period a measure originally introduced in 2018 to ensure that banks remain resilient and can withstand a potentially severe downturn in the housing market without restricting the supply of credit.

The measure entails a credit institution-specific minimum level of 25% for the average risk weight of Swedish housing loans applicable to credit institutions that have adopted the internal ratings-based (IRB) approach to calculate their capital requirements.. The requirement applies on a solo and consolidated level. The measure targets retail exposures secured by real estate, both small and medium-sized (SME) and non-SME exposures. The period of application of the two-year extension will start from 31 December 2023.

In its Opinion, addressed to the Council, the European Commission, and the Swedish Financial Supervisory Authority, the EBA do not object to the extension of the current measure. The EBAtakes note of ongoing concerns regarding systemic risk relating to the housing market and the persistence of macroprudential vulnerabilities in the Swedish financial system. The EBA acknowledges that IRB model estimates are based on the extremely low historical credit losses from Swedish mortgages and partly reflect the absence of a major crisis in Sweden in recent decades. The EBA welcomes the ongoing review of banks’ internal models and invites Finansinspektionen to closely monitor the situation and to stand ready to reassess the appropriateness of the notified measure.

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European Supervisory Authorities publish joint criteria on the independence of supervisory authorities

Source: European Banking Authority

The three European Supervisory Authorities– the European Banking Authority (EBA), European Insurance and Occupational Pensions Authority (EIOPA) and European Securities and Markets Authority (ESMA) (EBA, EIOPA and ESMA – the ESAs) – today published their joint criteria on the independence of supervisory authorities.

Supervisory independence is key to ensure that fair, effective and transparent decisions are taken by appropriately resourced supervisory authorities. These authorities can in turn provide effective and adequate protection for customers and consumers of financial services ensuring confidence in the financial system.

The independence criteria are organised around four key principles:

  • Operational independence: so supervisory authorities operate without any form of undue influence from the supervised sector and the government, have adequate legal powers and operational resources.
  • Personal independence: with transparent rules for the appointment, selection and removal of members of the supervisory authority’s governing body, and high ethical standards for members of the supervisory authority’s staff and governing body.
  • Financial independence: with sufficient financial resources for supervisory authorities to fulfil their mandates.
  • Accountability and transparency: so supervisory authorities conduct their tasks in a transparent and accountable manner.

Background

In 2020, following their review, the ESAs were tasked to foster and monitor supervisory independence.

To fulfil this task, in 2021 the ESAs published in close coordination their individual reports (Read here: EBA, EIOPA, ESMA) to take stock of the factual situation of supervisory authorities’ independence. Building on these reports and based on the 2021 EIOPA’s criteria and international standards, the ESAs further worked together to issue joint criteria on the independence of supervisory authorities.

Next steps

The criteria can be used by supervisory authorities as a tool to enhance their independence and, at a later stage, by the ESAs to assess supervisory independence in the EU.

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ESA’s Joint Board of Appeal suspends the decision by the European Securities and Markets Authority to withdraw the recognition decision of Dubai Commodities Clearing Corporation as a Tier 1 third-country central counterparties 

Source: European Banking Authority

ESA’s Joint Board of Appeal suspends the decision by the European Securities and Markets Authority to withdraw the recognition decision of Dubai Commodities Clearing Corporation as a Tier 1 third-country central counterparties 

25 October 2023

The Joint Board of Appeal (“the Board”) of the European Supervisory Authorities (“ESAs”) decided that the application for suspension brought by Dubai Commodities Clearing Corporation (“DCCC”) against the European Securities and Markets Authority (“ESMA”) is admissible and suspends the ESMA Decision.

 The application was brought in relation to ESMA’s Decision, adopted under Article 25p Regulation (EU) No 648/2012 (EMIR), to withdraw the recognition of DCCC as a Tier 1 third-country central counterparties (CCP) as a consequence of the United Arab Emirates (UAE) being included in the list of high-risk third countries provided for in the Commission Delegated Regulation (EU) 2016/1675.

DCCC challenged ESMA’s Decision, asking the Board to extend the adaptation period and to suspend the withdrawal Decision until the outcome of the appeal is concluded.  The Board finds that the appeal case is admissible and suspends the ESMA Decision.

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​The EBA consults on draft Guidelines on internal governance arrangement for issuers of asset-referenced tokens under the Markets in Crypto-Assets Regulation

Source: European Banking Authority

​The European Banking Authority (EBA) today launched  a public consultation on its new Guidelines on internal governance arrangements for issuers of asset referenced tokens (ARTs) under the Market in crypto-assets Regulation (MiCAR). These Guidelines specify the governance provisions that these issuers should comply with, taking into account the proportionality principle. This governance framework aims at ensuring a sound management of all risks associated with the activities of issuers of ARTs, such as operational risks, including fraud, cyber, and compliance risks. In addition, the provisions aim to adequately protect consumers and investors. The consultation runs until 22 January 2024.

​In line with the proportionality principle and to take account of the specificities of issuers of ARTs, this consultation paper specifies a number of governance provisions laid down in the MiCAR, including the tasks, responsibilities of the management body as well as the organisation of issuers of ARTs. The aim of these provisions is to ensure the sound management of risks across all lines of defence to allow the supervision of issuers of ARTs. 

​In addition, the consultation paper provides details on how issuers of ARTs should identify sources of operational risk and minimise those risks through the development of appropriate systems, controls, and procedures.  It also specifies the arrangements to be put in place when relying on third-party entities for operating the reserve of assets, for the investment of the reserve assets, the custody of the reserve assets and, where applicable, the distribution of the asset-referenced tokens to the public. Finally, the draft Guidelines provide details on the establishment of business continuity plans. 

​This publication together with the other consultations papers published today form a second batch of MiCAR policy products. The EBA expects to publish a third batch in November 2023.  

​Consultation process 

​Comments to the consultation paper can be sent by clicking on the “send your comments” button on the EBA’s consultation page. The deadline for the submission of comments is 22 January 2024.  

​The EBA will hold a virtual public hearing on the consultation paper on 11 January 2024 from 09:30 to 13:00 Paris time. The EBA invites interested stakeholders to register using the link by 9 January 2024 at 16:00 CET.  The dial-in details will be communicated to those who have registered for the meeting. 

​All contributions received will be published following the end of the consultation, unless requested otherwise.  

​Legal basis and next steps 

​These draft Guidelines have been developed in cooperation with the European Securities and Markets Authority (ESMA) and the European Central Bank (ECB), in accordance with Article 34(13) of Regulation (EU) 2023/1114 which requires to specify the minimum content of governance arrangements for issuers of ARTs, in particular with regard to: 

  • ​the monitoring tools regarding operational risk;
  • ​the internal control mechanism for risk management, including with regard to the reliance on third-party entities for operating the reserve of assets, and for the investment of the reserve assets, the custody of the reserve assets and, where applicable, the distribution of the asset-referenced tokens to the public;
  • ​the business continuity policy and plans on ICT systems and procedures;
  • ​the audits, including the minimum documentation to be used in the audit. 

​When issuing these Guidelines, the EBA has taken into account the provisions on governance requirements in other Union legislative acts on financial services, including Directive 2014/65/EU. 

​The EBA Guidelines will apply to competent authorities across the EU, as well as to issuers of ARTs. 

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​The EBA consults on draft technical standards on governance arrangements of the remuneration policy under the Markets in Crypto-Assets Regulation

Source: European Banking Authority

​The European Banking Authority (EBA) launched today a public consultation on its draft Regulatory Technical Standards (RTS) on the minimum content of the governance arrangements on the remuneration policy under the Market in crypto-assets Regulation (MiCAR). These draft RTS specify the main governance processes regarding the adoption, implementation and maintenance of the remuneration policy and the main policy elements that should be included in the remuneration policy. The consultation runs until 22 January 2024. 

​To ensure that remuneration policies promote the sound and effective risk management of issuers of significant asset referenced tokens (ARTs) and of significant e-money tokens (EMT) and do not create incentives to reduce risk standards, remuneration policies should be performance-related, ensure alignment with the risks of the issuer, provide incentives to staff for long term-oriented risk-taking behavior in line with the issuer’s risk appetite and ultimately contribute to the protection of the holders of tokens.  

​To ensure cross sectoral consistency, these RTS set a framework similar to the remuneration framework for investment firms that aims at achieving the same regulatory objectives.  

​This publication together with the other consultations papers published today form a second batch of MiCAR policy products. The EBA expects to publish a third batch in November 2023.  

​Consultation process 

​Comments to the consultation paper can be sent by clicking on the “send your comments” button on the EBA’s consultation page. The deadline for the submission of comments is 22 January 2024.  

​The EBA will hold a virtual public hearing on the consultation paper on 11 January 2024 from 09:30 to 13:00 Paris time. The EBA invites interested stakeholders to register using the link by 9 January 2024 at 16:00 CET.  The dial-in details will be communicated to those who have registered for the meeting. 

​All contributions received will be published following the end of the consultation, unless requested otherwise.  

​Legal basis and next steps 

​The draft RTS have been developed in close cooperation with the ESMA, in accordance with Article 45 Article 45(7)(a) of Regulation (EU) 2023/1114 which requires to develop draft regulatory technical standards specifying the minimum content of the governance arrangements on the remuneration policy.  

​Article 45(1) of Regulation (EU) 2023/1114 requires issuers of significant asset-referenced tokens to adopt, implement and maintain remuneration policies that promote sound and effective risk management of such issuers and that do not create incentives to relax risk standards.  

​These requirements also apply to electronic money institutions issuing e-money tokens that are significant by virtue of Article 58(1), point b, of Regulation (EU) 2023/1114 and can be expanded to e-money institutions issuing e-money tokens that are not significant if the competent authority of the home Member State requires it so, following Article 58(2) of that Regulation

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The EBA consults on draft technical standards on the procedure for the approval of white papers of asset-reference tokens issued by credit institutions under the Markets in Crypto-Assets Regulation

Source: European Banking Authority

The European Banking Authority (EBA) today published a Consultation Paper on draft regulatory technical standards (RTS) on the procedure for the approval of white papers of asset-reference tokens (ARTs) issued by credit institutions. These draft RTS aim at harmonising the approval procedure across the European Union by laying down the steps and timeframes to be followed by credit institutions and by the relevant competent authority. The consultation runs until 22 January 2024.

The draft RTS propose steps and timeframes that credit institutions, competent authorities and the ECB or other central banks must follow during the procedure for the approval of a crypto-asset white paper. To ensure consistency, these RTS set out a structure that is similar to the process regulated under Article 17(1)(b) of Regulation (EU) 2023/1114 on Markets in Crypto-assets (MiCAR) for the notification of other information by credit institutions that aim to issue ARTs.

In particular, the elements covered in these RTS are (a) the submission of an application for approval of a white paper, (b) the acknowledgment of receipt and processing of an application by the competent authority, (c) the assessment of completeness of a white paper and request of missing information by the competent authority, (d) the information exchange between the competent authority and the ECB or other central bank, where applicable, (e) the substantive assessment and request of changes by the competent authority, and (f) the approval of the white paper.

This publication together with the other consultations papers published today form a second batch of MiCAR policy products. The EBA expects to publish a third batch in November 2023.

Consultation process

Comments to the consultation paper can be sent by clicking on the “send your comments” button on the EBA’s consultation page. The deadline for the submission of comments is 22 January 2024. 

The EBA will hold a virtual public hearing on the consultation paper on 11 January from 14:30 to 16:00 CEST. The EBA invites interested stakeholders to register using this link by 9 January 2024 at 16:00 CEST. The dial-in details will be communicated to those who have registered for the meeting.

All contributions received will be published following the end of the consultation, unless requested otherwise. 

Legal basis

The EBA has developed these draft RTS in accordance with Article 17(8) of Regulation (EU) 2023/1114 on Markets in Crypto-assets (MiCAR) and in close cooperation with the European Securities and Markets Authority (ESMA) and the European Central Bank (ECB), which mandates the Authority to specify the procedure for approval of white papers of ARTs issued by credit institutions as well as the procedure for the approval of a crypto-asset white paper for an ART issued by a credit institution.

Background

Regulation (EU) 2023/1114 on Markets in Crypto-assets establishes a regime for the regulation and supervision of crypto-asset issuance and crypto-asset service provision in the European Union (EU). It came into force on 29 June 2023, and the provisions relating to ARTs will be applicable from 30 June 2024.

Among the activities within the scope of MiCAR are the activities of offering to the public or seeking admission to trading of ARTs and electronic money tokens (EMTs) and issuing such tokens. Supervision tasks are conferred on the EBA for ARTs and EMTs that are determined by the EBA to be significant. Additionally, the EBA is mandated to develop 17 technical standards and guidelines under MiCAR to further specify the requirements for ARTs and EMTs, and an additional 3 mandates jointly with ESMA (and, in one case, also with EIOPA).