EU lawmakers to vote on tighter crypto, ESG rules for banks

LONDON, Jan 23 (Reuters) – Banks will have to set aside a penalty amount to cover holdings of crypto assets under a draft law to be voted on by lawmakers on Tuesday.

The European Parliament’s economic committee is to vote on cross-party compromises, seen by Reuters, on a draft law that implements remaining elements of Basel III, a global accord that forces banks to hold more capital to cope with market shocks without help from taxpayers.

One amendment states that banks must apply a risk weighting of 1,250% of capital to crypto-asset exposures, which is enough to cover a complete loss in value.

This is in line with the recommendations of the global Basel Committee of banking regulators in December.

The changes also introduce a definition of “shadow banking”, the vast sector of insurance companies, hedge funds and investment funds that make up about half the world’s financial system and are usually less regulated than banks.

The change requires the EU’s executive European Commission to publish a report by June 2023 that analyzes the possibility of introducing prudent limits for the banks’ exposure to shadow banks.

Changes also require that the remuneration policy in the banks should be in line with their transition plans to manage environmental, social and governance (ESG) risks in the short, medium and long term.

The draft law introduces a new “fit and proper” regime for the appointment of bankers, with changes stating that it should be the aim of a bank’s management body.

They should be “sufficiently diverse in terms of age, gender and geographic and educational background,” according to a report by Jonas Fernandez, the committee member leading negotiations on the bill in parliament.

The changes generally go further than changes made by EU states, which struck a deal among themselves in December and which generally focused on temporary breaks in some of the requirements to give banks more time to adapt, in the face of opposition from the European Central Bank. .

After Tuesday’s vote, lawmakers and EU states will review a final deal that will come into force in 2025.

Reporting by Huw Jones, editing by Louise Heavens

Our standards: Thomson Reuters Trust Principles.