Regulation Across the Pond

EU Bank Regulator Recommends Accelerating Integration of ESG Risks into Capital Requirement Framework

EU banking supervisor the European Banking Authority (EBA) announced the publication of a new report assessing the role of environmental and social risks in its prudential supervision framework for banks and investment firms, including recommendations for the acceleration of these risks across the Pillar 1 framework, which defines banks’ minimum capital requirements.

According to the EBA, the new report comes as environmental and social risks are expected to become more prominent over time, changing the risk profile for the banking sector, across financial categories such as credit and market risk, as well as operational risks, and potentially affecting individual institutions as well as the overall financial system’s stability. Read more

Bank of England considers changes to regulation of foreign bank branches

The Bank of England said on Monday it was thinking about possible changes to how it regulates branches of foreign banks, and flagged a likely easing in how it intends to apply global bank capital rules from mid-2025. The operations of California-based Silicon Valley Bank in Britain had been treated as a branch for 10 years before being required to become a subsidiary, which made it easier to engineer a rapid takeover by HSBC after SVB’s parent bank in the United States collapsed earlier this year.

BoE Deputy Governor Sam Woods said the central bank is now thinking about its regulatory approach to branches, which are largely supervised by regulators in their home countries. Subsidiaries are directly regulated by the BoE and must hold their own capital cushions. London is a magnet for foreign bank branches, which Woods said was a key part of Britain’s hosting of a competitive global financial centre. Read more

Banks must disclose crypto asset exposures says Basel Committee

Banks will be forced to disclose their exposure to crypto assets under new regulatory rules proposed by the Basel Committee on Banking Supervision. The international regulatory body has proposed a standardised disclosure table and set of templates for banks’ cryptoasset exposures with a proposed implementation date of 1 January 2025.

“Under the proposals, banks would be required to disclose qualitative information on their activities related to cryptoassets and quantitative information on exposures to cryptoassets and the related capital and liquidity requirements,” states the supervisory body. “Banks would also be required to provide details of the accounting classifications of their exposures to cryptoassets and cryptoliabilities. The Committee expects that a common format for disclosures will support the exercise of market discipline and help to reduce information asymmetry between banks and market participants.” Read more