Global Trustee and Fiduciary Services Bite-Sized Issue 12 2023

Global Trustee and Fiduciary Services Bite-Sized | Issue 12 | 2023 10 QUICK LINKS AIFMD BENCHMARK REGULATION CBDC COSTS & CHARGES CRYPTOASSETS FUND LIQUIDITY LIBOR TRANSITION MiCA OPERATIONAL RESILIENCE UK PRIIPs SUSTAINABLEFINANCE/ESG ASIA EUROPE IRELAND NORTH AMERICA UNITED KINGDOM EBA Consults on Draft RTS on Liquidity Requirements and on Draft Guidelines on Liquidity Stress Testing of Relevant Issuers of Tokens Under MiCA Three consultations on draft RTS to specify the liquidity requirements of the reserve of assets, the highly liquid financial instruments in the reserve of assets and the minimum content of the liquidity management policy and procedures of relevant issuers of tokens. Furthermore, the EBA consulted on draft Guidelines to establish the common reference parameters of the stress test scenarios to be included in their liquidity stress testing. These consultations form part of the prudential package of MiCA deliverables and make up the third batch of MiCA policy products. In the RTS on liquidity requirements of the reserve of assets the EBA proposes minimum percentage rates of the reserve of assets with a maturity of no longer than between 1 and 5 working days. Furthermore, the EBA proposes overall techniques for liquidity management of the reserve of assets. Moreover, the draft RTS establish the specific minimum amount of deposits with credit institutions to be held by issuers in each official currency referenced. In the RTS on highly liquid financial instruments in the reserve of assets, the EBA specifies financial instruments that can be considered highly liquid and bearing minimal market risk, credit risk and concentration risk, where the reserve of assets may be invested in. In the specification of highly liquid financial instruments, the EBA needs to consider the Liquidity Coverage Ratio (LCR) framework and the Undertakings for the Collective Investment in Transferable Securities (UCITS) framework. This latter framework serves to determine the concentration limits in the investment of highly liquid financial instruments by the issuer, which is also part of the mandate to the EBA. The EBA proposes draft RTS specifying the liquidity management policy and procedures. These ensure that the relevant issuers of tokens properly assess and monitor their liquidity needs and that their reserve assets have a resilient liquidity profile to meet any redemption of the asset- referenced tokens that can be requested at any time by their holders. The draft EBA Guidelines on liquidity stress testing lay out the risks identified by the EBA to be covered in the liquidity stress testing. They also pinpoint the methodology identifying the common reference parameters of the stress test scenarios to be included in the liquidity stress testing to be applied. Following application of the Guidelines, the supervisor may strengthen the liquidity requirements of the relevant issuer to cover those risks based on the outcome of the liquidity stress testing. Link to Consultation Paper on RTS to Specify the Highly Liquid Financial Instruments in the Reserve of Assets under MiCA here Link to Consultation Paper on RTS Further Specifying the Liquidity Requirements of the Reserve of Assets under MiCA here Link to Consultation Paper on RTS to Specify the MinimumContents of the Liquidity Management Policy and Procedures under MiCA here Link to Consultation Paper on Guidelines Liquidity Stress Testing under MiCA here OPERATIONAL RESILIENCE FSB Publishes Toolkit for Enhancing Third-party Risk Management and Oversight On 4 December 2023 the Financial Stability Board (FSB) published a toolkit for financial authorities and financial institutions for their third-party risk management and oversight. The toolkit was developed in response to concerns over the extent and nature of financial institutions’ interactions with a broad and diverse ecosystem of third-party service providers, which could have implications for financial stability. The primary emphasis of the toolkit is on critical third-party services, given the potential impact of their disruption on financial institutions’ critical operations and financial stability. It also looks holistically at financial institutions’ third-party risk management in light of changing industry practices and recent regulatory and supervisory approaches to operational resilience.