EU & UK Reg Round Up: 13/12/2024

European Banking Authority

ESAs publish guidelines on crypto-asset classification - 10 December 2024
The European Supervisory Authorities (EBA, EIOPA, and ESMA) have issued joint Guidelines to standardize the regulatory classification of crypto-assets under MiCAR. The Guidelines include a standardized test and templates for legal opinions and white paper explanations, ensuring consistent classification of asset-referenced tokens (ARTs) and other crypto-assets. This initiative aims to enhance regulatory convergence, reduce arbitrage, and promote investor protection. The Guidelines will apply three months after the translations are published, aligning with MiCAR’s phased implementation throughout 2024.

EBA consults on RTS for Internal Ratings Based approach changes - 9 December 2024

The EBA has launched a public consultation on draft Regulatory Technical Standards (RTS) aimed at refining the conditions for assessing material model changes (MMC) and extensions under the Internal Ratings Based (IRB) approach. This aligns with amendments introduced by CRR3 and seeks to enhance supervisory approval processes. Key updates include removing references to equity exposures, clarifying qualitative criteria for default definitions and validation, and refining quantitative backstop criteria. The consultation is open until 10 March 2025.

EBA publishes final RTS on long and short positions under market and counterparty risk derogations - 6 December 2024

The EBA has published final draft Regulatory Technical Standards (RTS) specifying the method for identifying the main risk driver and determining whether a transaction represents a long or short position. These RTS are part of the Phase 1 deliverables of the EU banking package for market risk. The methodology, which aligns with the FRTB-SA and SA-CCR approaches, includes a simplified method for simpler instruments. These RTS are developed under the revised CRR3 and address derogations in capital requirements for market and counterparty risks.

EBA proposes criteria for central contact point for CASPs to combat money laundering and terrorism financing - 4 December 2024
The EBA has launched a public consultation on draft Regulatory Technical Standards (RTS) specifying criteria for crypto-asset service providers (CASPs) to appoint a central contact point to ensure compliance with anti-money laundering and countering terrorism financing (AML/CFT) obligations. The RTS aim to address the challenges of supervising CASPs in host Member States, requiring them to comply with local AML/CFT obligations even when not considered ‘obliged entities.’ The consultation runs until 4 February 2025.

EBA amends supervisory reporting framework for investment firms - 3 December 2024

The EBA has amended the supervisory reporting framework for investment firms to align with the Capital Requirements Regulation (CRR3) and the Implementing Technical Standards (ITS) for credit institutions. The changes include supervisory reporting requirements for counterparty credit risk, market risk (K-NPR), and credit valuation adjustment (CVA) risk. Investment firms will now have the option to report the same information as credit institutions through the COREP templates. The updates reflect amendments introduced by CRR3, updating the references in the reporting framework for investment firms.

EU banks continue to be robust, although risks from geopolitical tensions and cyber threats remain significant, the EBA Report shows - 29 November 2024

The European Banking Authority (EBA) has published its autumn risk assessment report, accompanied by the 2024 EU-wide transparency exercise, which covers 123 banks from 26 EU and EEA countries. The report highlights that EU/EEA banks are facing slow economic growth and geopolitical risks, with limited direct exposure to high-risk countries but significant second-round risks. The commercial real estate sector and its ties to non-bank financial intermediaries remain a concern. Despite challenges, banks maintain strong capital positions and high profitability, though sustainability is a concern. Operational risks, especially from cyber threats, are rising, while AI use for efficiency gains also introduces new risks.

EBA finds Hungarian waiver for covered bonds justified - 28 November 2024
The European Banking Authority (EBA) has published an Opinion on the Central Bank of Hungary’s decision to introduce a partial waiver of the Capital Requirements Regulation (CRR) regarding the eligibility conditions for covered bonds to receive preferential risk weight treatment. The EBA supports this waiver, citing a significant concentration issue in Hungary’s covered bond market. The waiver is justified based on evidence showing that the application of the minimum credit quality step (CQS) requirement would exclude Hungarian banks from acting as derivative counterparties. The EBA concluded that the waiver is necessary to address these concentration risks.

European Securities and Markets Authority

ESMA consults on technical advice on listing Act implications - 12 December 2024

ESMA has launched a consultation to gather feedback on changes to the Market Abuse Regulation (MAR) and MiFID II introduced by the Listing Act. The consultation covers various aspects, including the timing of disclosure of inside information, with a focus on protracted processes and contrasting information. ESMA is also seeking input on methodologies to identify cross-border trading venues for the Cross Market Order Book Mechanism. Additionally, ESMA is reviewing provisions in MiFID II related to Multilateral Trading Facilities (MTFs) and their registration as Small and Medium-sized Enterprises Growth Markets (SME GMs). The aim of these changes is to enhance access to public capital markets for EU companies, particularly SMEs, while ensuring the integrity and transparency of EU markets.

ESMA consults on open-ended loan originating alternative investment funds - 12 December 2024
The European Securities and Markets Authority (ESMA) has published a consultation on draft regulatory technical standards for open-ended loan originating Alternative Investment Funds (AIFs) under the revised Alternative Investment Fund Managers Directive (AIFMD). The consultation seeks feedback on the requirements AIFs must meet to maintain an open-ended structure. The review of AIFMD introduces harmonized rules for loan-originating funds, aiming to create a common framework for AIFMs and National Competent Authorities (NCAs). Under the revised AIFMD, loan-originating AIFs are typically closed-ended unless their manager can demonstrate that their liquidity risk management aligns with their investment strategy and redemption policy.

Bank of England

Statistical notice – Reporting schedule for Statistical Returns 2025 available - 12 December 2024

The Bank of England has released the reporting schedule for Statistical Returns 2025, available for download in an XLSX format. For any queries, contact the BEEDS helpdesk at BEEDSqueries@bankofengland.co.uk. A summary of upcoming Statistical Notices is also available on the Statistical Notices page. Those responsible for completing Bank of England returns should ensure they receive these notices and subscribe to amend their circulation list.

Bank of England updates country classification for statistical publications - 12 December 2024

The Bank of England will align its classification of countries in statistical publications with the Bank for International Settlements (BIS), consolidating countries into two categories: Advanced Economies (AEs) and Emerging Markets and Developing Economies (EMDEs). This change, effective from the publication of 2025 Q1 data in June, will replace the current grouping of Developed, Offshore Financial Centres, and Developing countries. The update will also discontinue certain groupings such as "West Indies UK" and "British Overseas Territories," with notable countries now listed individually. Historical data back to September 1997 will be reclassified under the new scheme. Additionally, the Bank will revise nationality breakdowns in Table C3.1, focusing on broader categories like "UK", "American", "European", and "Other".

PRA consults on new liquidity reporting requirements for life insurers - 12 December 2024

The Prudential Regulation Authority (PRA) has launched a consultation on proposed liquidity reporting reforms for large life insurers. These new requirements aim to address gaps identified during market stress events like the 2020 'dash for cash' and the 2022 LDI crisis, which exposed weaknesses in insurers’ liquidity risk management. The proposed reforms, developed in collaboration with the Association of British Insurers (ABI) and industry stakeholders, seek to ensure timely, consistent, and comparable data on liquidity positions. The PRA intends to ease reporting expectations for firms using internal models by reducing their need to submit Standard Formula reports. The consultation seeks to strike a balance between effective liquidity oversight and minimizing the reporting burden on insurers.