Eva Dauberton
News Editor
EBA issues statement on expectations in light of MiCAR entry into effect
The European Banking Authority (EBA) has issued a statement reminding issuers of asset-referenced tokens (ARTs) and e-money tokens (EMTs), consumers, and other stakeholders of the coming into effect Markets in Cryptoassets (MiCAR) regulations. The statement also outlines key areas of supervisory focus for ARTs/EMTs issuers across the European Union in 2024/2025.
Some context
MiCAR establishes a regulatory framework for the issuance, offering, admission to trading, and provision of cryptoasset services in the EU. Most MiCAR provisions became applicable from 30 June 2024, with the remaining provisions coming into force at the end of December 2024.
Key takeaways
In its statement, the EBA emphasises the following:
- Issuers, offerors and persons seeking admission to trading of ARTs and EMTs are reminded of their obligations under MiCAR and advised to refer to the technical standards and guidelines available on the EBA’s website.
- Stakeholders providing services related to cryptoassets are encouraged to establish procedures to assess compliance with MiCAR of ARTs/EMTs for which they offer related services.
- Consumers are encouraged to consider specific factors before acquiring ARTs, EMTs, or other types of cryptoassets and be aware of the risks associated with acquiring cryptoassets that are not issued in accordance with MiCAR provisions.
- Competent authorities are urged to ensure that relevant information is provided to persons who have commenced or plan to commence ART/EMT activities.
The EBA also outlines 2024/2025 priorities for ART/EMT issuer supervision, including internal governance and risk management, financial resilience, technology risk management, and financial crime risk management. Holder protection and financial stability are highlighted as overarching objectives across all priority areas.
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ESMA publishes statement to support corporate sustainability reporting and final GLESI
The European Securities and Markets Authority (ESMA) has published a final report on the Guidelines on Enforcement of Sustainability Information (GLESI) and a public statement on the first application of the European Sustainability Reporting Standards (ESRS). These documents aim to ensure consistent application and supervision of sustainability reporting requirements.
Some context
The Corporate Sustainability Reporting Directive (CSRD) came into effect on 5 January 2023, updating regulations related to the social and environmental information companies must disclose. Under the CSRD, companies subject to the directive must report in accordance with the ESRS introduced by the European Financial Reporting Advisory Group (EFRAG) in November 2022.
The CSRD also introduces a new article, Article 28d, in the Transparency Directive, which mandates that ESMA issue guidelines for the supervision of sustainability reporting by national competent authorities. These guidelines apply to the supervision of undertakings with securities admitted to trading on a regulated market in the European Union and form the legal basis for the GLESI.
Member States were required to transpose the CSRD into national legislation by 6 July 2024. The phased application of the CSRD and the ESRS will commence on 1 January 2025, when the first undertakings start publishing sustainability statements under the new regime covering the financial year 2024. The CSRD replaces the existing Non-Financial Reporting Directive (NFRD).
Key takeaways
- ESRS
The ESRS covers a range of environmental, social, and governance issues, such as climate change, biodiversity, and human rights, delivering crucial information for investors to gauge the sustainability impact of the companies they invest in. The reporting requirements will be phased in over time for different companies.
In its public statement on the ESRS, ESMA aims to provide support for the implementation of these new requirements by referencing guidance from the European Commission and EFRAG and highlighting areas that are particularly relevant in the preparation of ESRS sustainability statements.
- GLESI
ESMA aimed to closely align the GLESI with the existing Guidelines on Enforcement of Financial Information (GLEFI) to ensure consistent enforcement of sustainability information with financial information and to elevate sustainability information to the same level as financial information. The GLESI consists of 22 guidelines grouped into six main areas: basic concepts, enforcers’ internal organisation, selection, examination, enforcement actions, and European coordination.
Next steps
National Competent Authorities (NCAs) have two months after ESMA publishes the GLESI in official EU languages on its website to notify ESMA whether they comply with or intend to comply with the guidelines.
ESMA will continue to monitor sustainability reporting practices in 2025, as well as the GLESI application and release recommendations in Q4 in its public statement on the 2024 European common enforcement priorities.
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EBA publishes methodology for 2025 EU-wide stress test
The European Banking Authority (EBA) has published, for informal consultation, its draft methodology, templates, and guidance for the 2025 EU-wide stress test. 68 banks will take part in the exercise, covering 75% of the EU banking sector.
Some context
The primary goal of the EU-wide stress test is to establish a common analytical framework for supervisors, banks, and other market participants to consistently evaluate the resilience of EU banks and the banking system to shocks and to assess the capital position of EU banks. The exercise is based on a common methodology, internally consistent and relevant scenarios, and a set of templates.
Key takeaways
The 2025 EU-wide stress test builds on the 2023 exercise methodology with some improvements reflecting new insights and regulatory changes, including the integration of the upcoming Capital Requirements Regulation (CRR3), set to be implemented on 1 January 2025, and the European Commission’s announcement to postpone the application date of the fundamental review of the trading book (FRTB).
Next steps
The EBA expects to publish the final methodology at the end of 2024, launch the exercise in January 2025, and release the results by the end of July 2025.
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BCBS proposes technical amendments to Basel standards
The Basel Committee on Banking Supervision (BCBS) has released proposed technical amendments to the Basel Framework (Framework) along with eight FAQs.
Key takeaways
To ensure consistent global implementation of the Framework, the BCBS regularly monitors the standard and addresses issues through FAQs or technical amendments.
The proposed amendments include two technical changes to the Framework:
- Addressing an inconsistency in the definition of specialised lending between the standardised and internal ratings-based (IRB) approaches to credit risk.
- Aligning the formula for aggregating curvature risk positions for Group 2a cryptoasset exposures with the formula applied to other asset classes under the market risk framework.
The annexe provides a final set of eight FAQs that are not part of the consultation.
Next steps
The BCBS welcomes comments by 19 August 2024.
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SEC fines Silvergate Capital and executives $50 million for misleading investors about compliance program
The Securities and Exchange Commission (SEC) has fined Silvergate Capital Corporation (Silvergate), its former CEO Alan Lane, and former Chief Risk Officer (CRO) Kathleen Fraher over $50 million for negligence-based fraud and violations of reporting, internal accounting controls, and books-and-records provisions.
Between November 2022 and January 2023, Silvergate, Lane, and Fraher misled investors by stating that Silvergate had a strong BSA/AML compliance program and continuously monitored its high-risk crypto customers, including FTX, to counter public speculation that FTX had used its accounts at Silvergate for misconduct. However, it was discovered that Silvergate’s automated transaction monitoring system failed to track over $1 trillion in customer transactions on its payments platform, the Silvergate Exchange Network.
To settle the charges, Silvergate agreed to a final judgment requiring the payment of a $50 million civil penalty and the imposition of a permanent injunction. Lane and Fraher also agreed to permanent injunctions, five-year officer-and-director bars, and civil penalties of $1 million and $250,000, respectively. Additionally, the SEC charged Martino with violating certain antifraud and books-and-records provisions of federal securities laws and aiding and abetting certain of Silvergate’s violations.
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ASIC proposes managed investment scheme legislative instrument sunset
The Australian Securities and Investments Commission (ASIC) is proposing that the ASIC Corporations (Land Holding for Primary Production Schemes) Instrument 2024/15 expire on 1 October 2024.
According to the notice, ASIC understands that the managed fund sector may no longer require relief for primary production schemes covered by this instrument.
ASIC invites feedback by 9 August 2024 on whether the instrument still forms a necessary and useful part of the legislative framework and whether standards set out in the instrument remain appropriate to ensure effectiveness.
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OSFI delays increase of Basel III output floor by one year
The Office of the Superintendent of Financial Institutions (OSFI) of Canada has announced a one-year delay to the increase of the capital floor level (or “output floor”).
Canada completed its implementation of Basel III reforms in early 2024. It established a three-year phase-in of the capital floor consistent with the Basel Committee on Banking Supervision (BCBS) timetable.
The purpose of the capital floor is to reduce excessive variability and enhance the comparability of risk-based capital ratios. The capital floor requires that risk-weighted assets generated by internal model-based approaches cannot, in aggregate, fall below a percentage of the risk-weighted assets computed by the standardised approach. With the one-year delay, the transition of the capital floor will be as follows:
- Floor adjustment factor for 2024: current 67.5% -> revised 67.5%
- Floor adjustment factor for 2025: current 70% -> revised 67.5%
- Floor adjustment factor for 2026: current 72.5% -> revised 70%
- Floor adjustment factor for 2027 and beyond: current 72.5% -> revised 72.5%
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