EU & UK Reg Round Up: 09/05/2024

European Banking Authority

EBA launch a public consultation on the specification of long and short positions - 24 April 2024

This public consultation will focus on identifying the main risk driver and determining whether a transaction represents a long or short position. This comes under the derogations for market and counterparty risks under the Capital Requirements Regulation (CRR). CRR3 specifies that the size of the business shall be equal to the absolute value of the aggregated long positions, summed with the absolute value of the aggregated short positions. A position can be determined as short or long depending on the main risk drivers that impact the market value.

EBA have identified new types of payments frauds and proposes measures to mitigate them - 29 April 2024

The European Banking Authority (EBA) has released an Opinion on payment fraud data, highlighting emerging fraud patterns and proposing measures to address them. While current regulations like Strong Customer Authentication (SCA) have reduced credential theft, new fraud techniques have emerged such as “social engineering” which undermines these measures. The Opinion suggests enhancing upcoming legislative frameworks like PSD3 and PSR, as well as the new provisions that came into force through the Instant Payments Regulation (IPR).

The three ESAs issued their Spring 2024 Joint Committee update on risks and vulnerabilities - 30 April 2024

The outcome of this committee update is that risks remain elevated in the EU financial system due to slow growth, as well as an uncertain interest rate environment along with ongoing geopolitical tensions. The financial markets performed well despite of the uncertainties surrounding interest rates, but that could also come back to hurt when potential corrections take place. Credit risk is also rising, despite asset quality remaining robust in the banking sector, it is expected to deteriorate as economic growth slows further and refinancing needs grow. Despite banks having a high CET1 ratio of 15.8% and a LCR above 160% along with high profitability in 2023, the outlook is challenging as banks face repricing of liabilities and assets along with prospects of lower interest income.

European Securities and Markets Authority

ESMA proposes change to the ELTIF RTS - 22 April 2024

ESMA has responded to the European Commission’s request to amend the European Long-Term Investment Fund (ELTIF) technical standards. ESMA suggests limited changes to the RTS to enable a better balance between retail investor protections and capital market union objectives.

ESAs consult on technical standards for joint examination teams under DORA - 18 April 2024

ESAs have initiated a public consultation on the draft Regulatory Technical Standards (RTS) in relation to the joint examination teams under the Digital Operational Resilience Act (DORA). The primary goal of the RTS is to lay out the criteria for determining the composition of the joint examination teams, ensuring they have a balanced participation from ESAs and relevant competent authorities. This is critical for maximum efficiency and effectiveness in overseeing ICT third-party service providers (CTPPs).

Deutsche Bundesbank

Bundesbank to conduct research into central bank digital currencies (CBDC) - 16 April 2024

The deutsche Bundesbank and Massachusetts Institute of Technology (MIT) have partnered to conduct research on central bank digital currencies. The collaboration will involve experts from both institutions exploring how new technologies for CBDC can be designed, and this collaboration poses to be one of the world’s leading research groups in this field.

Central Bank of Ireland

The CDI to introduce macroprudential measures for Irish-authorised GBP-denominated LDI funds - 29 April 2024

The CBI announced the introduction of macroprudential measures for Irish-authorised GBP-denominated Liability Driven Investments (LDI) funds. Building on the consultation paper launched on this topic, the measure requires GBP-denominated LDI funds to maintain sufficient resilience to withstand sudden and adverse shocks to UK interest rates. Following disruptions in the UK gilt market in 2022 attributed to excessive leverage by LDI funds, the CBI will collaborate with international partners such as the CSSF, UK authorities, and ESMA to ensure coordinated measures for GBP-denominated LDI funds.