EU adopts new rules on markets in crypto-assets
The European Union’s Economic and Financial Affairs Council (ECOFIN) has approved the Markets in Crypto-Assets (MiCA) regulation, a comprehensive set of rules governing the use of cryptocurrencies in the bloc. The MiCA regulation was first proposed by the European Commission in September 2020 and has been in the works since then. It was approved by the European Parliament in April 2023 and by the ECOFIN on May 16, 2023. The MiCA regulation will come into effect within a year, meaning it will be law by mid-2024. It will apply to all cryptocurrency issuers, exchanges, and wallet providers operating in the EU. The MiCA regulation sets out a number of requirements for cryptocurrency service providers, including registration and authorization requirements, security and risk mitigation requirements, and measures to prevent market abuse.
Fed publishes supervision and regulation report
The Federal Reserve has published its Federal Reserve Supervision and Regulation Report which summarises banking conditions and the Federal Reserve’s supervisory and regulatory activities.
The report, last published in November 2022, notes that the “US banking system is sound and resilient, with strong capital and liquidity” and goes on to outline regulatory and supervisory developments including statements made for supervised institutions engaged in or interested in engaging in crypto-asset-related activities and supervisory activity around “horizontal assessments of contingency funding plans at firms supervised by the Large Institution Supervision Coordinating Committee as well as of liquidity risk management at large and foreign banking organizations. In addition, the Federal Reserve has increased supervisory activities at community banking organizations (CBOs) and regional banking organizations (RBOs) with elevated interest rate risk exposures.”
Additionally, the report notes: “examiners have increased the frequency and depth of their monitoring of the funding positions of potentially vulnerable banks. Examination activities have also been directed toward assessing the current valuation of investment securities, deposit trends, the diversity of funding sources, and the adequacy of contingency funding plans”.
OCC chief on preventing future banking challenges
In a statement to the to the House of Representatives Committee on Financial Services, Acting Comptroller of the Currency, Michael J Hsu has outlined four areas for OCC focus to prevent a repeat of the recent challenges to the banking sector in the US. Hsu said:
- supervisors need support to act in a timely and effective manner;
- regulations regarding the resilience and resolvability of large banks need to be strengthened;
- deposit insurance coverage should be updated; and
- the diversity of the banking system must be preserved as the industry evolves.
Hsu concluded: “continued industry and regulatory vigilance is critical. Banks and supervisors must be attentive to the most salient risks today, as well as those beyond the daily headlines.”
BIS speech on retail banking future
Michael Hsu’s speech mirrors one made by Claudia Buch, Vice-President of the Deutsche Bundesbank, at the 21st Retail Banking Day of the “Börsen-Zeitung”.
Buch highlights three areas that will help secure the prosperity of the retail banking sector.
- Gearing risk management and governance of institutions to negative scenarios:
- Strengthening supervision to identify and address risks
- Evaluating financial market regulation to strengthen resilience
Buch notes that the “too big to fail” (TBTF) question has been partially addressed “now [that we] have a much better institutional framework for dealing with major financial institutions in stress. Resolution regimes have been strengthened, more funds are available to absorb losses (total loss absorbing capacity, or TLAC), and risks are better priced in markets.” But that “The TBTF evaluation clearly showed where gaps remain: national systemically important banks are treated differently and there is hardly any internationally comparable information on these institutions. There is also little information about the holders of bail-inable financial instruments, which could nevertheless give rise to global contagion effects. The question of how liquidity is provided in the event of a resolution is highly topical.”
SEC charges 10 microcap companies with securities offering registration violations
The Securities and Exchange Commission has charged 10 microcap companies for offering and selling securities in unregistered offerings that failed to comply with Regulation A, which provides a limited exemption from registration under the Securities Act to allow companies to raise money from the public if they meet specific requirements.
According to the SEC’s orders, each of the 10 microcap companies obtained qualification from the SEC for their securities offerings using Regulation A, but they subsequently made one or more significant changes to their offerings without meeting the requirements of the exemption. The SEC’s orders found that such changes included improperly increasing the number of shares offered, improperly increasing or decreasing the price of shares offered, failing to file updated financial statements at least annually for ongoing offerings, engaging in prohibited at the market offerings, or engaging in prohibited delayed offerings. As a result, each of the microcap companies offered and sold securities in violation of the offering registration provisions.
Daniel R Gregus, Director of the SEC’s Chicago Regional Office said: “These actions stand as a reminder that companies which choose to circumvent Regulation A’s requirements by engaging in prohibited conduct or making fundamental changes to their offerings without qualification will face action by the SEC.”
A selected summary of key developments for regulated financial institutions
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