Regulation And Readiness Will Go Hand In Hand For European Banks
In its recently released work plan for 2023, the European Banking Authority (EBA) shows how the banking sector of the European Union plans to adapt to new rules, move forward with its digitalization goals, and encourage more collaboration in areas like payments and fighting financial crime.
The document is based on the six strategic pillars of the EBA’s strategic priorities for 2023–2025. These include addressing risks and challenges related to information and communications technology (ICT) and digital finance while strengthening “operational resilience.”
It is expected that both MiCA and DORA will go into effect in 2023. And, depending on how the legislative process goes, the EBA says that it expects businesses to have met the requirements of the new laws by January 1, 2025.
In 2023, the EBA plans to work on this pillar by creating the policy framework needed for the bloc’s banking sector to adapt to two upcoming pieces of EU legislation: the Digital Operational Resilience Act (DORA) and the Markets in Crypto Assets Act (MiCA).
Aiding Banks and FinTechs Prepare
The goal of the DORA law is to make it legal for financial institutions to deal with digital risk and to make sure that all EU countries have the same requirements for assessing risk and dealing with it. The law will focus on the banking and financial services industries, as well as technology companies that work with financial institutions.
In order to get ready for the new rule, the EBA will keep researching and writing about the most important operational resilience and cybersecurity issues in the financial services sector. The report said that this includes a “risk analysis and mapping of use cases of AI in finance.”
The EBA will also meet with the relevant European supervisory authorities (ESAs) next year for a “high-level exercise on the landscape of ICT third-party providers in the EU financial sector.” This will involve a meeting between European regulators to talk about how the new DORA rules can be applied to software developers and other tech companies that aren’t usually regulated by the ESAs.
The EBA also took the chance to say that it liked what the European Systemic Risk Board (ESRB) had to say about a pan-European framework for coordinating systemic cyber incidents. With a single framework, different types of institutions would know how to report things like data breaches and cyberattacks.
The EBA plans to work out the details of such a framework and figure out how it would be put into place.
When it comes to the MiCA law, the EBA wants to set up a single rulebook for the issuance of crypto-assets and the provision of services across the region. It also wants to explain what MiCA means for financial institutions by, for example, giving more details about the capital requirements for issuers.
The EBA will also make supervisory policies and procedures, as well as templates for sharing information between crypto-asset issuers, national competent authorities, the European Central Bank, and other relevant central banks.
According to the outline of the agenda, the EBA will continue to keep an eye on financial innovation and find areas where more regulation may be needed. Innovations that are on its radar include crypto assets that are not covered by MiCA, as well as decentralised finance, AI, digital platforms, and RegTech.
In the end, the EBA’s main job for both DORA and MiCA in the coming year will be to write the technical standards for how the new laws will be put into place on the ground.
And to help affected businesses meet the new requirements, the EBA, the European Securities and Markets Authority (ESMA), and the European Insurance and Occupational Pensions Authority (EIOPA) will work with the European Commission next year to develop the training curriculum for the EU Supervisory Digital Finance Academy.
The academy is an EU project that aims to improve the ability to keep an eye on digital finance. It does this through a series of workshops that help people learn about how to regulate digital finance.
