- The European Union reaches a provisional agreement on amendments to the Capital Requirements Regulation and the Capital Requirements Directive as a part of Basel III reforms.
- The agreement includes a harmonized framework for crypto assets, aiming to ensure the integrity and stability of the banking sector.
- The deal is subject to confirmation by the Council and the Parliament before formal adoption.
In an unprecedented move, the European Union has reached a provisional agreement on crypto bank-capital rules. The agreement came into existence after negotiators from the Council presidency and the European Parliament, in conjunction with the European Commission, reached a consensus.
The agreement addresses the implementation of the ‘output floor’, which puts a limit on banks’ variability of capital levels when using internal models. It also encompasses improvements in credit risk, market risk, and operational risk domains, while ensuring proportionality for small and non-complex institutions.
Significantly, the agreement introduces a harmonized ‘fit and proper’ framework for members of financial institutions’ management bodies. Additionally, rules to ensure supervisory independence have been agreed upon, including cooling-off periods for staff and members of governance bodies before they can assume positions in supervised institutions.
Of particular interest to the crypto community is the agreement’s inclusion of a transitional prudential regime for crypto assets. This development heralds a new era in the crypto regulatory landscape, as the European Union takes measures to integrate crypto assets into the conventional banking framework.
The agreement aims to bolster the resilience of banks operating within the Union while ensuring the integrity and stability of the financial sector. Furthermore, the agreement solidifies the EU’s commitment to implementing Basel III, which encompasses measures aimed at fortifying regulatory standards, supervision, and risk management in the banking sector in response to the Global Financial Crisis of 2007/2008.
While the agreement has been achieved ‘ad referendum’, it remains provisional until confirmed by the Council and the Parliament, after which it will be formally adopted. This landmark decision marks a critical step towards the maturation of the crypto market in Europe, fostering a more secure and stable environment for investors and institutions alike.