EU Implements Basel III Capital Rules
The draft law, approved by the European Parliament's economic affairs committee, will implement Basel III capital rules starting January 2025. The committee also approved temporary divergences to give banks more time to adapt.
Banks Required to Cover Cryptoasset Risks
The draft law introduces new elements, including the requirement for banks to hold enough capital to cover their holdings of crypto assets fully. "Banks will be required to hold a euro of their capital for every euro they hold in crypto," said Markus Ferber, a center-right German committee member.
EU Takes Preventative Measures
The move, an interim measure pending further EU legislation, is in line with recommendations from global banking regulators. Ferber explained that "prohibitive capital requirements will help prevent instability in the crypto world from spilling over into the financial system."
Industry Body Expresses Concerns
The Association for Financial Markets in Europe (AFME), an industry body, has expressed concerns that the draft law contains no definition of crypto assets and could be applied to tokenized securities.
EU Negotiates Final Text
EU states have already approved their version of the draft law. Lawmakers will now negotiate a final text with member states, with further adjustments expected.
Foreign Banks Monitoring EU Talks
Foreign banks operating through branches in the EU will be closely monitoring the talks. EU states have taken a more accommodative approach to when foreign banks serving customers in the bloc should open a branch or convert a branch into a more heavily capitalized subsidiary. In contrast, EU lawmakers have taken a harder line.
EU Seeks "Strategic Autonomy" in Capital Markets
The EU is keen to build up "strategic autonomy" in capital markets as it faces competition from a financial center on its doorstep after Brexit. AFME has emphasized the importance of avoiding a "significant adverse impact" of tightening EU access to international markets and cross-border services.
