MIL Publishing Engine 1

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.

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

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. 

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

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).

Source: European Banking Authority

The European Banking Authority (EBA) and the European Securities and Markets Authority (ESMA) today published a Consultation Paper on two draft Joint Guidelines covering suitability assessment of members of the management body, and suitability of shareholders and members with qualifying holdings of issuers of asset referenced tokens (ARTs) and of crypto-asset service provider (CASPs). The guidance will provide clarity and harmonisation with respect to the criteria to assess the suitability of the management body, the shareholders and members with qualifying holdings, thus reducing the risk of arbitrage in the application of the rules. The consultation runs until 22 January 2024.

To foster and protect the integrity of the market in crypto assets and related services and to promote trust, it is important to ensure that the members of the management body of issuers of ART’s and CASPs as well as the persons that hold or wish to acquire qualifying holdings in them are suitable.

The draft Joint Guidelines on the suitability assessment of the members of the management body of issuers of ARTs and CASPs provide common criteria to assess the appropriate knowledge, skills and experience of members of the management body as well as their good repute, honesty and integrity and if they are able to commit sufficient time to perform their duties.

The draft Joint Guidelines on the suitability assessment of shareholders or members, whether direct or indirect, with qualifying holdings in issuers of ARTs or CASPs provide competent authorities common methodology to assess the suitability of the shareholders and members with direct or indirect qualifying holdings for purposes of granting authorisation as issuers of ARTs or as CASPs, and for carrying out the prudential assessment of proposed acquisitions.

Consultation process

Comments to this consultation can be sent to the EBA by clicking on the “send your comments” button on the consultation page.

The deadline for the submission of comments is 19 January 2024.

The EBA will inform ESMA of all the comments received. All received contributions will be published at the end of the consultation, unless requested otherwise.

Background

The EBA and ESMA have received two joint mandates under MiCA to issue respectively (i) guidelines on the assessment of the suitability of the members of the management body of issuers of ARTs and of the shareholders and members, whether direct or indirect, that have qualifying holdings in issuers of ARTs in accordance with Article 21(3), and (ii) guidelines on the assessment of the suitability of the members of the management body of the CASP and of the shareholders or members, whether direct or indirect, that have qualifying holdings in the CASP in accordance with Article 63(11).

Source: European Banking Authority

The European Banking Authority (EBA) today published the European Supervisory Examination Programme (ESEP) for 2024, which identifies key topics for heightened supervisory attention across the European Union. The ESEP is aimed at driving supervisory convergence by providing Competent Authorities with a single set of priorities for implementation in 2024.

The EBA selected the following three key topics for supervisory attention for 2024 on the basis of its EU-wide risk analysis, its relevant policy work and the practical experience of competent authorities:

• liquidity and funding risk
• interest rate risk and hedging
• recovery operationalisation

The choice of such topics was supported by structural changes, such as i) the end of the abudant liqudity in the system; ii) the increased interest rate environment; iii) the implementation of the IRRBB package in the EU; iv) lessons learned from the spring bank failures, v) energy and food markets volatility. These topics target aspects that are considered ‘specific’ for the upcoming year compared to the ‘business as usual’.

The specific supervisory attention to these areas will contribute to ensuring the financial resilience of EU institutions, and will ultimately lead to a higher level of supervisory convergence across the EU, also through the implementation of the related policy products.

The EBA will follow up on how these key topics are embedded in competent authorities’ priorities for 2024, and how they form part of their supervisory activities throughout the year. The observations collected will feed into the overall conclusions on the degree of convergence of supervisory practices. 

Note to the editors

The ESEP is one of the key elements of the EBA`s supervisory convergence toolkit which aims at delivering the EBA`s supervisory convergence mandate as required by the EBA`s founding regulation and by Article 107 of the CRD specifically in the context of the supervisory review. The 2024 ESEP complements competent authorities` core prudential supervisory activities and does not aim to provide an overarching and comprehensive supervisory examination programme, as that should be developed by competent authorities taking into account the ESEP, the structure and specific vulnerabilities of the banking system under their remit and the idiosyncratic dimensions of the individual bank or banking group they supervise.

With a view to fostering greater convergence of resolution practices, the EBA also sets priorities for resolution authorities in its annual European Resolution Examination Program (EREP). The 2024 priorities were published as part of the EBA’s latest Resolution Convergence report.

Source: European Banking Authority

The European Banking Authority (EBA) today published a Report on the role of environmental and social risks in the prudential framework of credit institutions and investment firms. Taking a risk-based approach, the Report assesses how the current prudential framework captures environmental and social risks. It recommends targeted enhancements to accelerate the integration of environmental and social risks across the Pillar 1. The proposed enhancements aim to support the transition towards a more sustainable economy, while ensuring that the banking sector remains resilient.

Environmental and social risks are changing the risk profile for the banking sector and are expected to become more prominent over time. They affect traditional categories of financial risks, such as credit, market and operational risks. Hence, environmental and social factors may affect both the risks faced by individual institutions and the financial stability of the entire financial system.

The Report recommends risk-based enhancements to the risk categories of the Pillar 1 framework. It also develops considerations on the potential use of macroprudential tools. The Report explains why the EBA does not support the introduction of a green supporting factor or a brown penalising factors at this stage. The use of such adjustment factors presents challenges in terms of design, calibration, and complex interaction with the existing Pillar 1 framework.

Against this background, the EBA puts forward recommendations for short-term actions to be taken over the next three years as part of the implementation of the revised Capital Requirements Regulation and Capital Requirements Directive (CRR3/CRD6).

In particular, the EBA is proposing to:

1. Include environmental risks as part of stress testing programmes under both the internal ratings-based (IRB) and the internal model approaches (IMA) under the Fundamental Review of the Trading Book (FRTB).
2. Encourage inclusion of environmental and social factors as part of external credit assessments by Credit Rating Agencies.
3. Encourage the inclusion of environmental and social factors as part of due diligence requirements and valuation of immovable property collateral.
4. Require institutions to identify whether environmental and social factors constitute triggers of operational risk losses.
5. Progressively develop environment-related concentration risk metrics as part of supervisory reporting.

Taking a medium-to-longer term perspective, the Report also presents possible revisions of the Pillar 1 framework reflecting the growing importance of environmental and social risks. These include:

1. The possible use of scenario analysis to enhance the forward-looking elements of the prudential framework.
2. The role that transition-plans could play in the future as part of the development of further risk-based enhancements to the Pillar 1 framework.
3. Reassessing the appropriateness of revising the IRB supervisory formula and the corresponding standardised approach (SA) for credit risk to better reflect environmental risk elements.
4. The introduction of environment-related concentration risk metrics under the Pillar 1 framework.

Alongside other policy initiatives outside the prudential framework, the EBA will continue to strengthen the integration of environmental and social risks across all pillars of the regulatory framework.

Legal basis and background

The EBA is mandated under Article 501c of Regulation (EU) No 575/2013, i.e. the Capital Requirements Regulation (CRR), and Article 34 of Regulation (EU) 2019/2033, i.e. the Investment Firms Regulation (IFR), to assess whether a dedicated prudential treatment of exposures related to assets, including securitisations, or activities (CRR), and of assets exposed to activities (IFR) associated substantially with environmental and/or social objectives would be justified.

The Report builds on the principles presented in the EBA Discussion Paper on the role of environmental risks in the prudential framework, published in May 2022.

Source: European Banking Authority

EU/EEA banks: benefits from rising interest rates are stabilising, the EBA says

10 October 2023

Source: European Banking Authority

The EBA publishes 2023 list of third country groups and third country branches operating in the EU/EEA

04 October 2023