European Banks To Reveal Crypto Assets Exposure
The announcement from the European Union institutions stated that banks would now be required to disclose their exposure to crypto assets.
This requirement will be introduced in accordance with a deal for implementing regulatory standards that have been globally agreed upon for improving the strength of financial institutions.
The agreement
A provincial agreement was made between representatives of the European Council, Parliament, and the Commission for making amendments to the capital requirements imposed on banking institutions.
The purpose of the changes is to ensure that banks in the European Union can deal with economic shocks.
Therefore, they aim to implement Basel III global standards while keeping the specifics of Europe in mind. The EU and its G20 partners had come to an agreement on the third Basel Accord.
The Basel Committee on Banking Supervision made the announcement back in 2010, but the international standards had been postponed repeatedly until 2025.
The said framework includes standards for liquidity requirements for banks, their capital adequacy as well as stress testing.
An agreement had also been made by negotiators for introducing a transitional regime that would be applicable to cryptocurrencies.
Crypto-related standards
As per the standards, European Union banks would be required to disclose their exposure to crypto tokens as well as other digital assets due to the risks associated with them.
A press release was issued by the European Parliament, which revealed that in its ongoing work, the Basel Committee has decided that a relevant legislative proposal should be developed by the Commission.
This proposal would be helpful in implementing the Basel standards and also assist in identifying how these exposures should be treated within the transitional period.
Apart from that, the state of the banking system would also have to be assessed by the European Commission in the single market of Europe by the end of 2028.
It would work with the European Central Bank (ECB) and the European Banking Authority (EBA) in order to complete this assessment.
The Commission would then have to report to the Council and Parliament on whether the supervisory framework for banks is appropriate or not.
Other details
A bill aimed at implementing the global bank capital rules received the support of the members of the Committee on Economic and Monetary Affairs (ECON) of the European Parliament at the start of 2023.
These rules include strict regulations that would protect banking institutions that keep digital assets from risks related to them.
The latest agreement needs the approval of ECON. The deal happened after the Markets in Crypto Assets (MiCA) law of the European Union received approval from lawmakers back in April.
This law comprises of regulations that have been specifically developed for governing the crypto market in Europe.
Back in May, the European Council also adopted the said legislation and it will be fully implemented throughout the European Union by 2025.
It is likely that regulatory bodies have become active in regulating banking institutions with crypto exposure due to the recent impact of the crypto market crash on banks.
