EU Financial Regulation
EU FINANCIAL REGULATION
Banks - CRD V Systemic Importance Indicators
The European Banking Authority’s consultation paper on draft revised guidelines on the specification and disclosure of systemic importance indicators (principally geared at updating an annex which replicates a BCBS template that is issued annually) closed on 1 September 2023.
Crypto - Markets in Financial Instruments Regulation (MiCA)
ESMA’s first consultation package under MiCA runs until 20 September 2023. ESMA plans to issue two further consultation packages.
The first package contains proposed rules for crypto-asset service providers (CASPs) related to their authorisation, identification and management of conflicts of interests and also how CASPs should address complaints.
ESMA also asked for insights on respondents’ current and planned activities to better understand the EU crypto-asset markets and future plans. Areas of interest include jurisdictions in which CASPs plan to provide services; planned services; high level explanations of business models (with a focus on the type of trading systems that the CASPs plan to use); expected turnover and plans for white papers; and the use of on-chain vs off-chain trading. Responses to those additional insights will not be made public, and will instead be used to help calibrate the second and third consultation packages.
The second consultation paper is expected in October 2023. It will cover sustainability indicators; business continuity requirements; trade transparency data and order book record-keeping; record-keeping requirements for CASPs; classification and templates and format of crypto-asset white papers; and public disclosure of inside information.
The third and final consultation paper is expected in Q1 2024. It will cover the remaining mandates with an 18-month deadline rather than a 12-month deadline. That paper is expected to cover qualification of crypto-assets as financial instruments; monitoring, detecting, and notifying market abuse; investor protection; reverse solicitation; suitability of advice and portfolio management services to the client; policies and procedures for crypto-asset transfer services, including clients’ rights; and system resilience and security access protocols.
The European Commission also asked for advice from the EBA by 30 September 2023 (see cover letter and call for advice) on key points to inform the preparation of Level 2 measures under MiCA, in particular:
- Certain criteria for classification of asset reference tokens (ARTs) and e-money tokens (EMTs) as significant by the EBA, the content and format of the information to be provided by competent authorities to the EBA and central banks on the classification criteria, and the procedure and timelines for the EBA’s decision on classification of ARTs as significant.
- The type of fees that the EBA is empowered to impose on the issuers of significant ARTs and EMTs under MiCA. This includes the matters for which fees are due, the amount of the fees, the way they are to be paid and the methodology to calculate the maximum amount per entity that can be charged by the EBA.
Investment Firms – Liquidity Requirements
Commission Delegated Regulation (EU) 2023/1651 with regulatory technical standards (RTS) for the specific liquidity measurement of investment firms under Article 42(6) of the Investment Firms Directive (IFD) comes into force on 12 September 2023.
Article 42 of the IFD gives competent authorities the power to impose additional Pillar 2 liquidity requirements on an individual investment firm, where that firm is exposed to liquidity risk or elements of liquidity risk that are material. Article 42(6) gave the Commission the power to adopt a Delegated Regulation containing RTS to specify how the liquidity risk and elements of liquidity risk are to be measured.
Investment Firms – Pillar 2 add-ons
Commission Delegated Regulation (EU) 2023/1668 supplementing the IFD with RTS on Pillar 2 add-ons for investment firms comes into force on 20 September 2023.
National competent authorities (NCAs) have the power, under Article 40 of the IFD, to impose additional Pillar 2 capital requirements on investment firms. These capital requirements are intended to address risks or elements of risks that investment firms face or pose to others that are not covered or not sufficiently covered by the own funds requirements set out in Part Three or Four of the Investment Firms Regulation.
The RTS, which reflect a mandate under Article 40(6) of the IFD, aim to clarify how NCAs should measure these risks. They contain provisions on (a) risks of disorderly wind-down; (b) risks not covered or not fully covered by K-factor requirements; and (c) risks not covered or not fully covered by own funds requirements.
Operational Resilience
The public consultation launched by the European Supervisory Authorities (EBA, EIOPA, ESMA) on the first set of technical standards under the Digital Operational Resilience Act (DORA) closes on 11 September 2023.
This first public consultation covers four sets of draft RTS and one set of draft implementing technical standards (ITS) and focus on ICT risk management, major ICT-related incident reporting and ICT third-party risk management.
Consultation paper: RTS on criteria for the classification of ICT-related incidents
Consultation paper: ITS to establish the templates for the register of information
Consultation paper: RTS to specify the policy on ICT services performed by ICT third-party providers
The second RTS/ITS package will deal with criteria for the classification of IT incidents as ‘major’; the reporting arrangements and requirements for such incidents; the framework around threat led penetration testing; and aspects of the oversight arrangements for critical third party providers (CTPPs).
The ESAs also received a call for advice from the Commission on criteria for designating a CTPP as critical and how fees should be calculated for the oversight of CTPPs. The deadline for that advice is September 2023.
Solvency II Directive
Commission Implementing Regulation (EU) 2023/1672 with technical information for calculating technical provisions and basic own funds for reporting under the Solvency II Directive entered into force on 1 September 2023 (but has applied since 30 June 2023).