In a move that could have far-reaching implications for the banking sector, the European Parliament is set to vote on a bill that would require banks to hold capital reserves equivalent to 1,250% of their exposure to cryptoassets.
The bill, which is being considered by the Economic Affairs Committee, is aimed at implementing rules left over from Basel III and includes a number of additional provisions that have been the result of compromise between the parties.
The new regulations, if passed, could make it much more difficult for banks to invest in cryptoassets, and may even force some to divest their current holdings.
Banks must hold excess capital
An amendment requires banks to hold risk-weighted capital equivalent to 1,250% of their exposure to cryptoassets to cover a full loss of value.
This provision is in line with recommendations made by the Basel Committee to banking supervisors in December.
What is envisaged for shadow banks
Another amendment establishes a definition of the “shadow banking sector” – which includes insurance companies, hedge funds and investment funds – that accounts for about 50% of the global financial system and is typically less regulated than banks.
This amendment requires the Commission to publish a report by June 2023 analyzing the possibility of introducing supervisory limits on banks’ exposure to shadow banking.
The suitability of bank executives
Another provision provides that banks’ remuneration policies should be aligned with their transition plans to address environmental, social and governance risks in the short, medium and long term.
The bill provides for a new “fit and proper” regime for the appointment of bankers, with the bill stating that there should be targets for a bank management body.
Bank executives should be “sufficiently diverse in terms of age, gender and geographical and educational background”, according to a report by Jonas Fernandez, the commissioner leading the negotiations on the bill.