EC Updates Address Rules on Digital Platforms, Cyber Risk, and CMDI

Crisis Management and Deposit Insurance Framework. The proposal on reforms to the bank crisis management and deposit insurance will enable authorities to organize the orderly market exit for a failing bank of any size and business model, with a broad range of tools. It will facilitate the use of industry-funded safety nets to shield depositors in banking crises, such as by transferring them from an ailing bank to a healthy one. Such use of safety nets must only be a complement to the banks' internal loss absorption capacity, which remains the first line of defense. The proposal is intended to:

• facilitate the use of deposit guarantee schemes in crisis situations to shield depositors (natural persons, businesses, public entities, etc.) from bearing losses, where this is necessary to avoid contagion to other banks and negative effects on the community and the economy.
• protect taxpayers that do not have to step in to preserve financial stability by relying on industry-funded safety nets (such as deposit guarantee schemes and resolution funds).
• shield the real economy from the impact of bank failure. The proposed rules will allow authorities to fully exploit the many advantages of resolution as a key component of the crisis management toolbox.
• harmonize further the standards of depositor protection across the European Union. The new framework extends depositor protection to public entities as well as client money deposited in certain types of client funds (that is, by investment companies, payment institutions, e-money institutions). The proposal includes additional measures to harmonize the protection of temporary high balances on bank accounts in excess of EUR 100,000 linked to specific life events (such as inheritance or insurance indemnities).

Digital Services Act. EC adopted the first designation decisions under the Digital Services Act to designate 17 entities as Very Large Online Platforms and 2 entities as Very Large Online Search Engines. The designated entities will now have to comply, within four months, with the full set of new obligations under the Digital Services Act. The designated platforms and search engines need to adapt their systems, resources, and processes for compliance, set up an independent system of compliance, and carry out, and report to EC, their first annual risk assessment. Platforms will have to identify, analyze, and mitigate a wide array of systemic risks ranging from how illegal content and disinformation can be amplified on their services, to the impact on the freedom of expression and media freedom. The Digital Services Act will be enforced through a pan-European supervisory architecture, working in close cooperation with the Digital Services Coordinators in the supervisory framework established by the Digital Services Act. Moreover, EC is consulting, until May 25, 2023, on the provisions in the Digital Services Act related to data access for researchers to better monitor platform providers' actions to tackle illegal content and conduct research on systemic risks in the European Union. In another development, EC seeks views on draft rules on how independent audits should be conducted under the Digital Services Act for Very Large Online Platforms and Very Large Online Search Engines, with the comment period ending on June 02, 2023. The draft rules provide the main principles that auditors should apply when selecting auditing methodologies and procedures and provides further specifications for auditing Very Large Online Platforms' and Very Large Online Search Engines' compliance with risk management and crisis response obligations. EC intends to adopt the rules before the end of 2023.

Digital Markets Act. As of May 02, 2023, the rules for digital gatekeepers to ensure open markets start to apply. The potential gatekeepers that meet the quantitative thresholds established have until July 03, 2023 to notify their core platform services to EC. EC will then have 45 working days (until September 06, 2023) to decide whether the company meets the thresholds and to designate gatekeepers. Following their designation, gatekeepers will have six months (that is, until March 06, 2024) to comply with the requirements in the Digital Markets Act. The Digital Markets Act defines gatekeepers as those large online platforms that provide an important gateway between business users and consumers, whose position can grant them the power to act as a private rule maker, and thus create a bottleneck in the digital economy. The Digital Markets Act defines a series of obligations that gatekeepers will need to respect, including prohibiting them from engaging in certain behaviors in a list of dos and don'ts.

EU Cyber Solidarity Act. The proposed regulation on the Cyber Solidarity Act will support detection and awareness of cybersecurity threats and incidents, bolster preparedness of critical entities, and reinforce solidarity, concerted crisis management, and response capabilities across member states. The Cyber Solidarity Act will strengthen solidarity at EU level to better detect, prepare for, and respond to significant or large-scale cybersecurity incidents, by creating a European Cybersecurity Shield and a comprehensive Cyber Emergency Mechanism. EC proposed the establishment of a European Cyber Shield, which is a pan-European infrastructure of national and cross-border Security Operations Centers across EU. These centers are tasked with detecting and acting on cyber threats quickly and effectively and could be operational by early 2024. The Cyber Solidarity Act also includes the creation of a Cyber Emergency Mechanism to increase preparedness and enhance incident response capabilities in EU. Additionally, EC proposed a targeted amendment to the Cybersecurity Act, to enable the future adoption of European certification schemes for managed security services.

Related Links

• Reform of Bank Crisis Management Framework
• Press Release on Gatekeeper Designations
• Consultation on Access to Data Under Digital Services Act
• Consultation on Rules on Independent Audits Under Digital Services Act
• Press Release on Digital Markets Act
• Press Release on Cyber Solidarity Act