DFSA Addresses CRR2 Clarifications, DLT Rules, and Cybersecurity
The Danish Financial Supervisory Authority (DFSA) set out a statement on interpretation of the infrastructure support factor under the revised Capital Requirements Regulation (CRR2), a guidance on assessment of money laundering and terrorist financing (ML/TF) risks, and a strategy for the cyber and information security of financial sector (for 2022-2025). DFSA also announced sandbox testing of a pilot distributed ledger technology (DLT) solution for transaction settlement and that it has been proposed (comment period ended on September 26, 2022) to be designated as the supervisory authority and given the authority to set a lower threshold for the use of DLT-based market infrastructures. This is part of a Bill that amends the Companies Act, follows on from the DLT Regulation (Regulation 2022/858) adopted in the European Union, and is expected to be tabled on November 02, 2022.
With respect to the infrastructure support factor for lending under the CRR2, DFSA has received questions on interpretation of certain parts of the associated rules and has, therefore, published a note. Article 501a of the CRR2 introduced the infrastructure support factor, which allows exposures to infrastructure to be covered by the infrastructure support factor if the exposure meets a number of requirements. Specifically, the capital requirement for exposures linked to infrastructure can be multiplied by a factor of 0.75 if it meets the requirements for this. The note provides detailed answers to six questions: that provide clarifications with respect to this aspect of the regulation and the applicable criteria. The note states that, for an exposure to be covered by the infrastructure support factor, it must be a non-defaulting specialized lending or business exposure to an entity established specifically for the purpose of financing or operating physical structures or facilities, systems, and networks that provide or support basic public services. The CRR rules or the preparatory work do not provide a sharply defined definition of what can generally be said to be an infrastructure investment. Infrastructure and basic public services are thus widely referred to in preambles and other available material from the European Union.
Related Links (in Danish)
- Statement on Infrastructure Support Factor Under CRR
- Strategy for Cyber and Information Security
- Guidance on Assessment of ML/TF Risks
- DLT Pilot on Transaction Settlements
- Designated Authority for DLT
Keywords: Europe, Denmark, Banking, CRR, Infrastructure Supporting Factor, ML TFRisk, Cyber Risk, Regulatory Sandbox, Distributed Ledger Technology, Regtech, Regulatory Capital, RWA Calculation, Basel, Lending, Credit Risk, DFSA
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