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    EU Updates Address a CRR Rule, Digital Services Act, and Digital Euro

    February 01, 2023

    The Eurogroup issued a statement setting out progress on the digital euro project while the European Commission (EC) adopted the Delegated Regulation 2023/206, which supplements the Capital Requirements Regulation (CRR), on the regulatory standards on exposures secured by immovable property. Another update from EC involves the publication of a non-binding guidance for online platforms and search engines within the scope of the Digital Services Act or DSA.

    This guidance under the Digital Services Act aims to help these online platforms and search engines to comply with the requirement to publish user numbers in the European Union at the latest by February 17, 2023 and at least once every six months afterward. The guidance provides answers to a number of questions that EC received from providers of intermediary services, in light of the February 17, 2023 deadline, which is set out in Article 24(2) of the Digital Services Act, for the first publication of information on the number of average monthly active recipients of the service. As per the provisions of the Digital Services Act, if the published user number reaches more than 10% of the European Union population (45 million users), EC may designate a provider as very large online platform (VLOP) or a very large online search engine (VLOSE) and the provider would, respectively, be subject to additional obligations, such as making a risk assessment and taking corresponding risk mitigation measures. EC further highlights that the guidance may be subject to review based on the practical experience to be acquired in the coming months.

    Another update from EC involves the adoption of the Delegated Regulation 2023/206 that specifies (in Article 1) the types of factors to be considered for the assessment of the appropriateness of risk-weights for exposures secured by immovable property. The regulation also sets out (in Article 2) the conditions to be taken into account for the assessment of the appropriateness of minimum loss given default (LGD) values for exposures secured by immovable property. When assessing the appropriateness of risk-weights, the authorities designated in accordance with Article 124 (1a) of CRR shall have regard to other macro-prudential measures in force that already address the identified systemic risks affecting the appropriateness of the risk-weights referred to in Article 124(2); these include the specified measures in national law that are designed to enhance the resilience of the financial system and these measures are loan-to-value (LTV) limits, debt-to-income limits, debt-service-to-income limits, and other instruments addressing lending standards. Regulation 2023/206 shall enter into force on February 21, 2023.

    Finally, with respect to the digital euro project, Eurogroup welcomes the EC intention to table, in the first half of 2023, a legislative proposal that would establish the digital euro and regulate its main features, subject to the decision of the co-legislators. The statement, which was published after a recent round of discussions in the Eurogroup, notes that the ECB Governing Council is expected to review the outcome of the investigation phase in Autumn 2023 and decide, on this basis, whether to move to a realization phase. The possible issuance of a digital euro would only come at a later stage and would necessarily depend on the EU legislative developments. The statement also notes that, to be successful, a digital euro needs to be a common European and inclusive project, supported by the European public and built on a solid democratic basis. Therefore, the Eurogroup welcomes the engagement from the European Central Bank and EC in regularly informing the Eurogroup and the EU member states. The Eurogroup considers that the introduction of a digital euro as well as its main features and design choices requires political decisions that should be discussed and taken at the political level. The creation of a digital euro would require an appropriate legal basis, involving the European Parliament and the Council of the European Union based on a legislative proposal by EC.

     

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    Keywords: Europe, EU, Banking, Basel, Regulatory Capital, CRR, Regulatory Technical Standards, Credit Risk, Mortgage Lending, Digital Services Act, Digital Euro, CBDC, Regtech, ECB, EC

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