Insights

In this issue:

• EBA Advises the EC on the Implementation of Basel III Framework
• FCA Publishes Final Guidance to Cryptoassets Consultation Paper
• EBA Provides Clarifications for 4th and 5th Set of Issues
• Banks and TPPs Agree on Commitments in Relation to the Implementation of New Payments Rules
• MFSA Consultation on Binary Options
• ECB Letter on Stablecoins

EBA Advises the EC on the Implementation of Basel III Framework

On the 5th of August 2019, the European Banking Authority (EBA) has expressed its support to the European Commission’s implementation of the Basel III framework by publishing a quantitative analysis of the estimated impact brought by the full implementation of Basel III. This new framework demands a 24.4% increase on average with regards to the minimum capital requirements, reforms which the EBA believes will contribute to the credibility of the EU banking sector by increasing financial stability whilst maintaining the continued use of risk-sensitive approaches.

FCA Publishes Final Guidance to Cryptoassets Consultation Paper

The Financial Conduct Authority (FCA) aspired to give market participants and interested stakeholders clarity upon which types of cryptoassets fall within the FCA’s regulatory remit, as well as providing information on those cryptoassets that are outside its perimeter, by summarising the feedback they received to the consultation paper with their responses within their Guidance Paper on the Cryptoassets Consultation Paper (CP 19/3). Such guidance was, inter alia, relevant to firms; issuing or creating, marketing, buying or selling, holding or storing cryptoassets products and services; as well as other professional participants to the market.

FCA consultation paper

EBA Provides Clarifications for 4th and 5th Set of Issues

After publishing the first set of clarifications within the last two months, the European Banking Authority (EBA) has published its fourth and fifth set of clarifications, answering issues which were raised by the participants of its working group upon application program interfaces (APIs) under the Payment Services Directive II (PSDII). Such solutions tackled, inter alia, issues regarding the confirmation of payment execution, biometrics and authentication on mobile apps. The issues raised by the participants of the Working Group, also revolved around the machine-readability of the EBA register, eIDAS certificates and contingency measures.

Banks and TPPs Agree on Commitments in Relation to the Implementation of New Payments Rules 

Two European third party providers associations (ETPPA and FDATA) alongside three European credit sector associations (the ECSAs) have published a joint statement recognising the importance of implementing the heightened standards imposed by PSDII, as well as the need to adhere to such heightened standards by the 14th of September 2019. Both sides agreed to pursue efforts in assisting in the implementation of strong customer authentication and to encourage transparency initiatives from within the ECSA membership. Such efforts would, inter alia, consist of calling upon ASPSPs and TPPs to communicate with PSUs and clarify the changes that are brought with the new SCA methods, or calling upon the TPPs representative association’s memberships to intensify their testing on APIs currently available. The Central Bank of Malta (CBM) has expressed difficulties primarily in managing to implement the regulatory technical standards by the 14th September deadline. CBM noted that this has formally been delayed and that it shall not take enforcement action against entities who have evidence that they have taken the necessary steps to comply with the agreed migration plans. Nonetheless, the CBM shall keep contact with the EBA in order to ensure a smooth implementation.

Banks and TPPs joint statement

CBM news

MFSA Consultation on Binary Options

On Monday 13th May 2019, the Malta Financial Services Authority published a consultation paper regarding the Binary Options promoting the Product Intervention method in relation to Article 42(2) of the Regulation (EU) No 600/2014 (Markets in Financial Instruments Regulation). In this document, that was available for consultation until Monday 27th May 2019, the MFSA investigated the nature of binary options, explaining why they are classified as complex financial instruments and consequently their intrinsic risk. MFSA continued explaining how the proposed national measures reflect the temporary measures of the European Securities and Markets Authority (ESMA), particularly its pan-EU ban on trade/distribution/sale of binary options to retail investors. MFSA therefore proposed to apply these measures to companies with the following characteristics:

• All investment firms licensed in Malta to trade/distribute/sell binary options to retail clients;
• All investment firms licensed in other EU Member States that trade/distribute/sell binary options through the creation of a branch in the Maltese territory or which provide services on a cross-border basis.

Following the publication of this consultation, MFSA has received a feedback statement from the stakeholders in this sector and has issued the below statement in respect to the comments received.

MFSA feedback statement

ECB Letter on Stablecoins

On the 25th of July, 2019, Mario Draghi sent a letter to MEP Markus Ferber to discuss stablecoin projects, and the European System of Central Bank’s close monitoring on such projects. Such monitoring is leading to comprehensive assessment of the potential risks that stablecoins present to financial stability, as well as their potential impact on the central banks’ roles, such as safeguarding the safety and efficiency of payment systems and the smooth conduct of monetary policy.

ECB letter