On Tuesday, June 27, the European Parliament’s ECON Committee negotiators finalized the deal with respect to the changes to the financial service industry’s supervisory framework. Specifically, the rules deal with bank capital requirements.
Also Read: Crypto: EU Watchdogs ‘Advised’ To Curb Leveraged Trading
What to expect next?
The latest announcement came right after the meeting among members of the European Parliament, national governments, and the European Commission concluded. The deal introduces a host of changes to how banks evaluate the risk of loans. Now that the deal is struck, members stated in the EU’s Council that lawmakers will vote on it.
European lawmakers decided in January to make banks holding cryptos follow more stringent measures. As reported recently, the prohibitive measures mandated banks to hold a euro of their own capital for every euro they hold in crypto assets like Bitcoin and Ether. According to Parliament members, it will prevent instability in the crypto world from spilling over into the financial system. However, others argue that this could end up denting their incentive to buy.
Specifically, an amendment stated that banks will have to apply a risk-weighting of 1,250% of capital to crypto assets exposures. Such a measure would ensure that entities have enough backup to cover for a complete loss in their value. Members of the EU Parliament wish to see these rules implemented at the earliest.
Alongside, it is worth noting that the European Commission privately proposed cutting some slack for stablecoins. A recent report pointed out that members intend to slash down the risk weight for any stablecoin whose value is tied to non-fiat assets like gold to 250%. The proposal further underlined that tokenized assets and stablecoins associated with fiat currencies like the U.S. dollar will be treated the same as the underlying instrument. However, this will not be applicable if there’s an extra credit or market risk.
Also Read: EU Tightens Rules for Banks Holding Crypto