Eva Dauberton
News Editor
EBA publishes final draft technical standards under MiCAR
The European Banking Authority (EBA) has released four sets of final draft technical standards, including three draft regulatory technical standards (RTSs) and one draft implementing technical standards (ITS), under the Markets in Cryptoassets Regulation (MiCAR). These technical standards cover the authorisation as an issuer of asset-referenced tokens (ARTs), the information required for assessing the acquisition of qualifying holdings in ART issuers, and the procedure for approving white papers for ARTs issued by credit institutions.
Some context
MiCAR serves as a regulatory framework within the European Union (EU) for the issuance and provision of cryptoassets. This encompasses activities like offering ARTs and electronic money tokens (EMTs) to the public or seeking approval for trading and issuing such tokens. The regulation came into effect on 29 June 2023, with the provisions regarding ARTs and EMTs becoming applicable from 30 June 2024.
The EBA has been tasked with developing 17 technical standards and guidelines to clarify the requirements for ARTs and EMTs.
These final technical standards were developed in response to consultation papers published in July and October 2023.
Key takeaways
Draft RTS and ITS on information for authorisation as issuers of ARTs under MiCAR
The draft RTS on authorisation lays down the information requirements to be included when applying for authorisation to offer to the public or seek admission to trading of an ART. Following the public consultation, the scope of the authorisation has been amended to clarify that:
- The applicant issuer may only be a legal person or undertaking established in the EU.
- Whilst the issuance is not subject to authorisation, which only covers the public offer or the admission to trading, an application may only be submitted by an applicant issuer. Therefore, only an issuer may be granted authorisation.
The draft ITS on authorisation sets out the standard application letter and the application template and clarifies the process relating to the assessment of completeness of the application by the competent authority.
Draft RTS on information for assessment of a proposed acquisition of qualifying holdings
The draft RTS specifies the information necessary for the competent authority to carry out the prudential assessment in case of proposed acquisitions in issuers of ARTs that are not credit institutions.
It covers five criteria relating to:
- The reputation of the proposed acquirer
- The suitability of any person who will direct the target undertaking
- The financial soundness of the proposed acquirer
- The sound and prudent management of the target undertaking following the acquisition
- Suspicion that money laundering of terrorist financing is committed or attempted or that it may increase following the acquisition
Draft RTS on the procedure for the approval of white papers of ARTs issued by credit institutions
Unlike other issuers of ARTs, credit institutions do not require authorisation to issue ARTs but must notify their competent authority, and the white paper must be submitted to the competent authority for approval.
The draft RTS sets out the timeframes that credit institutions, competent authorities and the European Central Bank (ECB) or other central banks must follow during the procedure for the approval of a crypto-asset white paper.
Next steps
The draft ITS and RTSs will be submitted to the European Commission for endorsement and publication in the Official Journal of the European Union.
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ESMA issues call for evidence on UCITS Eligible Assets Directive
The European Securities and Markets Authority (ESMA) has issued a Call for Evidence (CfE) on the Undertakings for Collective Investment in Transferable Securities (UCITS) Eligible Assets Directive (EAD). The purpose of this CfE is to gather information from stakeholders regarding the risks and benefits associated with UCITS gaining exposure to different asset classes. ESMA also aims to gain insights into the key concepts and definitions used in the UCITS EAD and their consistency with other legislation in the EU Single Rulebook.
Some context
Since the adoption of the UCITS EAD in 2007, there has been a significant increase in the number, type, and variety of financial instruments traded on financial markets. This has led to uncertainty regarding the eligibility of certain financial instruments for investment, resulting in divergent interpretations and market practices concerning the application of the UCITS Directive. Such discrepancies may raise concerns regarding investor protection. Therefore, ESMA believes it is crucial to gather feedback from stakeholders on market practices, interpretation issues, and practical application related to the eligibility criteria and other provisions stated in the UCITS EAD.
Key takeaways
ESMA is seeking input from stakeholders on various questions related to the following areas:
- Convergence issues and clarity of key concepts and definitions: Stakeholders are invited to provide evidence and perspectives on the clarity of key concepts and potential interpretation and convergence issues associated with the application of the UCITS EAD.
- Direct and indirect UCITS exposures to certain asset classes and related data collection/analysis: Stakeholders are encouraged to share their insights on the risks and benefits of UCITS gaining exposure to asset classes where there are divergent views regarding their eligibility as UCITS investments.
Next steps
The deadline for feedback is 7 August 2024. Once all the evidence and views have been collected, ESMA will develop its technical advice for the European Commission.
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EBA issues CP on draft RTS on equivalent mechanism for unfinished property
The European Banking Authority (EBA) has issued a consultation paper (CP) on the draft regulatory technical standards (RTS) on the equivalent mechanism for unfinished property under the Capital Requirements Regulation (CRR). This CP focuses on Article 124 of the CRR, which outlines the requirements for assigning risk weights to exposures secured by mortgages on immovable property.
Some context
Article 124(3)(a) (iii) of the CRR allows retail immovable property exposures that are still undergoing construction to be eligible for preferential risk weight treatment, given certain conditions specified in Article 125(1) of the CRR.
One of these conditions is that a central government, regional government, local authority, or public sector entity involved has the legal powers and capability to ensure the completion of the property under construction within a reasonable timeframe. Alternatively, an equivalent legal mechanism can ensure that the property under construction is completed within a reasonable timeframe.
Key takeaways
The CP aims to provide clarity regarding the requirements related to the equivalent legal mechanism, outlining three potential conditions in Article 124(3)(a) (iii) that could be further developed under this mechanism.
Next steps
Stakeholders are invited to submit their comments on this CP by the deadline of 8 August 2024.
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UK Parliament report suggests FCA needs to do more for SMEs
A report from the UK Parliament’s Treasury Committee has concluded that existing financial regulation and inadequate support from banks have hindered the growth of small and medium sized enterprises (SMEs) in the UK.
Some context
The report – SME Finance – is based on 119 written evidence submissions and four oral evidence submissions as a follow–up to the 2018 report produced by the previous Treasury Committee.
An SME is defined in the UK as an entity with fewer than 250 employees.
Key findings
The report notes that SMEs have faced significant challenges since the last report. Government initiatives have offered some support, but the report highlights ongoing issues.
Access to finance for SMEs has declined, with reduced confidence and acceptance rates, coupled with increasing de-banking and inadequate dispute resolution. Unfair banking practices exacerbate the situation, hindering innovation and growth.
Among the recommendations are the following specific to the UK regulators.
- The Prudential Regulation Authority must ensure that the final implementation of the Basel 3.1 standards leaves capital requirements on SME lending no more stringent than they are under the current system and that international competitiveness with the EU and the US is not harmed.
- HM Treasury and the Financial Conduct Authority (FCA) should continue their dialogue with the Financial Ombudsman Service (FOS) and keep resourcing under active review, to ensure that it has the prerequisite capacity and capability to serve most of the SME community.
- The FCA should continue their work into better understanding how financial institutions are using criteria like “reputational risk” or “risk appetite” and report their findings by the end of Q2 2024.
- The FCA should also require banks to submit quarterly data on business account closures to assist their wider review.
- The FCA should publish an aggregated form of this data periodically to improve transparency over business debanking and allow SMEs to make informed decisions on their choice of finance provider.
- The FCA should provide the FOS with the powers to address personal guarantees for SMEs, so that their service is consistent with consumers.
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FCA fines Shard Capital Partners LLP former CEO £120,300
The Financial Conduct Authority (FCA) has imposed a financial penalty of £120,300 on James William Edward Lewis, former CEO and Managing Partner of Shard Capital Partners LLP.
Lewis was found to have breached APER 2 for the period before 8 December 2019, by failing to act with due skill and care. He was also found to have breached COCON 1 for the period after 9 December 2019, by failing to act with integrity.
To resolve the matter, Lewis has agreed to pay the penalty and qualified for a 30% discount under the FCA’s executive settlement procedures. Without this discount, the FCA would have imposed a financial penalty of £171,900.
Additionally, the FCA has prohibited Lewis from performing any function in relation to any regulated activity carried on by an authorised person, exempt person, or exempt professional firm.
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CFPB orders firm to pay up for delaying consumer refunds
The Consumer Financial Protection Bureau (CFPB) has acted against Chime Financial for delays in giving refunds to consumers when closing their accounts. Many consumers experienced significant financial harm, waiting weeks or even months for refunds. Chime has been ordered to pay $1.3 million in redress to affected consumers and pay a $3.25 million penalty.
Despite its policy to issue refunds within 14 days, the CFPB found Chime often failed to meet this timeframe.
“Chime’s customers had to wait weeks or months for access to their own money and were forced to use alternative funds to cover their essential expenses,” said CFPB Director Rohit Chopra. “Fast-growing financial firms must treat their customers fairly and understand that federal law is not a suggestion.”
Chime Financial partners with banks to offer financial products like checking accounts and credit cards, serving approximately seven million consumers with $8 billion in monthly transactions.
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PSR CP24/7: APP scams data cycle 2 publication guidance
The UK’s Payment Systems Regulator (PSR) has published consultation paper (CP)24/7: APP scams data cycle 2 publication guidance which discusses the changes the PSR has made to the guidance surrounding the publication of authorised push payment (APP) scams data.
Some context
The PSR requires the 14 largest payment service providers (PSPs) in England and Northern Ireland to report APP scams performance data. The first set of this data was published in October 2023 on the PSR website and each of the 14 entities was required to publish a subset of the data on their own websites to allow comparisons.
The PSR provided guidance to firms to ensure the comparative data was appropriate. This consultation proposes some changes to the publication guidance for the next reporting cycle (cycle 2) and is intended to ensure that the data published will help consumers assess each PSP’s performance on APP scams.
Key takeaways
The CP proposes a number of changes as follows:
- Firms will have the option to publish APP scams data on the fraud section of their website, in addition to their homepage.
- Once cycle 2 data is published, cycle 1 data can be removed.
- The PSR confirms firms will receive all data charts the day the report is released.
- A new scale is added to the charts to facilitate comparisons.
- Changes from the previous period will be included in cycle 2 data.
Next steps
The brief consultation closes on 30 May 2024.
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HKMA launches Project Ensemble to support tokenisation market
The Hong Kong Monetary Authority (HKMA) has announced the launch of Project Ensemble, an innovative wholesale central bank digital currency (wCBDC) project that aims to support the growth of the tokenisation market in Hong Kong. The HKMA has also established a wCBDC Architecture Community to assist the project.
Project Ensemble seeks to explore innovative financial market infrastructure (FMI) to enable seamless interbank settlement of tokenised money through wCBDC. The core of the project is a wCBDC Sandbox, which is targeted for launch by mid-2024. The sandbox will facilitate further research and testing of tokenisation use cases. The wCBDC Architecture Community will assist in designing and implementing the Project Ensemble Sandbox.
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