EU & UK Reg Round Up: 29/07/2024
European Banking Authority
EBA updates list of systematically important institutions - 11 July 2024
The EBA has updated the list of other systemically important institutions (O-SIIs) in the EU, based on data from year-end 2023. This list, along with the list of global systemically important institutions (G-SIIs), is created using harmonised criteria specified in the EBA Guidelines. The updated list includes the overall scores calculated according to these guidelines and the capital buffer rates set by relevant authorities for the identified O-SIIs. The list can be viewed using a user-friendly visualisation tool. The key criteria for identifying O-SIIs include size, importance, complexity, and interconnectedness.
EBA launches consultation on amendments to its for internal model authorisation - 16 July 2024
The EBA have released a consultation paper proposing amendments to the Implementing Regulation for the joint decision process on internal model authorisation under the Capital Requirements Regulation (CRR). These amendments align with changes in the EU legal framework, including a narrower scope for internal models under CRR III and updates to the supervisory colleges' functioning framework. They have also removed the references to the Advanced Measurement Approach (AMA) due to its exclusion from the revised CRR III scope.
EBA publishes report on gender-neutral remuneration policies - 16 July 2024
The EBA have released a report examining the implementation of gender-neutral remuneration policies by institutions and investment firms. Findings from the report suggests that most institutions face no significant obstacles in implementing gender-neutral remuneration policies, but some entities have yet to incorporate explicit measures to ensure gender-neutral remuneration and it’s continuous monitoring. There also has been advancements in promoting equal pay, however, there is a persistent gender pay gap which remains, indicating ongoing biases and the need for further action.
EBA publishes report on derogations for variable remuneration requirements - 16 July 2024
The EBA have released a report assessing the application of derogations to the requirements for deferring a portion of variable remuneration and using instruments for identified staff at small and non-complex institutions, as well as for staff receiving relatively small amounts of variable remuneration. The report evaluates the impact of these derogations on costs, risk alignment of variable remuneration with the institution's risk profile, and the ability to recruit and retain staff. Historically, national implementations of the Capital Requirements Directive (CRD) allowed small and non-complex institutions and staff with low variable remuneration to waive certain requirements on proportionality grounds. With the introduction of CRDV derogations, the report indicates that changes are marginal due to previously existing waivers, now more harmonized under CRDV.
EBA clarifies the operational application of CRR3 in the area of credit risk modelling - 17 July 2024
The EBA has welcomed the entry into force of the new European Banking Package, which integrates the final Basel III framework into EU regulation. To ensure a smooth implementation, the EBA urges institutions and competent authorities to engage in active dialogue. Institutions should inform their competent authorities about their targeted model landscape, particularly following the migration of exposures to the Foundation Internal Ratings-Based (F-IRB) and Standard Approaches Institutions also need to assess and categorize changes resulting from the implementation of the Capital Requirements Regulation (CRR3) that affect rating system performance. Institutions should share with their competent authority an implementation plan for modelling updates linked to future EBA supervisory products.
European Securities and Markets Authority
New guidelines on crypto-assets classification by ESAs - 12 July 2024
The three European Supervisory Authorities (EBA, EIOPA, and ESMA) have released a consultation paper outlining new Guidelines under the Markets in Crypto-assets Regulation (MiCA). These Guidelines introduce a standardized test and templates for legal opinions and explanations to ensure consistent classification of crypto-assets. Specifically, they address the documentation required for asset-referenced tokens (ARTs) and other crypto-assets not classified as ARTs or electronic money tokens (EMTs).
ESMA seeks feedback on draft standards for order execution policies under MiFID II - 16 July 2024
The European Securities and Markets Authority (ESMA) has initiated a consultation on draft technical standards designed to refine how investment firms establish and evaluate their order execution policies. Aimed at enhancing investor protection, these standards will address several key areas: the formulation of order execution policies, including the classification of financial instruments and selection of execution venues; the procedures for monitoring and assessing the effectiveness of these policies; the execution of client orders through proprietary trading; and the handling of client instructions.
ESAs published second batch of policy products under DORA - 17 July 2024
The three European Supervisory Authorities (EBA, EIOPA, and ESMA – collectively known as the ESAs) have released the second set of policy products under the Digital Operational Resilience Act (DORA). This includes four final draft regulatory technical standards (RTS), one set of Implementing Technical Standards (ITS), and two guidelines, all designed to strengthen the digital operational resilience of the EU’s financial sector. The packages focus on the reporting framework for ICT-related incidents and threat-led penetration testing while also introducing some requirements on the design of the oversight framework.
Establishment of EU systemic cyber incident coordination framework by ESAs - 17 July 2024
The European Supervisory Authorities (EBA, EIOPA, and ESMA) announced the creation of the EU Systemic Cyber Incident Coordination Framework (EU-SCICF) under the Digital Operational Resilience Act (DORA). This initiative aims to enhance the financial sector's resilience and coordination in responding to cyber incidents that could threaten financial stability. The framework includes: EU-SCICF Secretariat, EU-SCICF Forum, EU-SCICF Crisis Coordination.
Bank of England
UK FX market sees 14% turnover growth in April 2024 - 22 July 2024
In April 2024, 27 financial institutions participated in the Foreign Exchange Joint Standing Committee's semi-annual survey, revealing a notable 14% rise in average daily turnover, reaching $3,351 billion. This increase compares with a 11% rise from April 2023 and aligns with the trend of higher April volumes. FX swaps remained the most traded instrument, constituting 45% of the total volume, followed by FX spot trades at 29%. The top three currency pairs—EUR/USD, GBP/USD, and USD/JPY—maintained their market share, with EUR/USD leading at $795 billion daily turnover, or 24% of the total. Since October 2008, FX turnover has nearly doubled, with non-deliverable forwards (NDFs) seeing the most significant growth, increasing ten-fold over the same period.
CHAPS payments issue on July 18th - 18 July 2024
A global payment issue was affecting the BOE CHAPS service which delayed some high value and time-sensitive payments, including some home purchases. Retail payment systems were unaffected. The issue was later resolved on the same day by the third party supplier and restored the service back to normal.