Financial Crime World

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EU’s Regulatory Framework in the Financial Sector

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The European Union has established a comprehensive regulatory framework for the financial sector, with a focus on banking regulations, investment firms package, and digitalization. This overview summarizes the key points of these regulations.

Banking Regulations

Capital Requirements Regulation (CRR) and Capital Requirements Directive (CRD)

  • The CRR and CRD provide a common set of rules for banks.
  • The EU’s banking package 2021 aims to strengthen the resilience of the financial sector by introducing additional requirements, such as the minimum requirement for own funds and eligible liabilities (MREL).

Top-Tier Banks

  • Top-tier banks, with total assets exceeding €100 billion, will be subject to TLAC/MREL requirements.
  • The daisy chain regulation addresses the prudential treatment of G-SIIs with a multiple-point-of-entry resolution strategy.

Investment Firms Package

Regulatory Regime for Investment Firms

  • The regulatory regime for investment firms introduced by IFD and IFR revised the framework in CRD, CRR, MiFID II, and MiFIR.
  • Larger, systemic investment firms are subject to the same prudential regime as CRR credit institutions.

Non-Systemic Investment Firms

  • Non-systemic investment firms are split into two groups, with simpler requirements for smaller firms.

Digitalization

The Digital Operational Resilience Act (DORA)

  • DORA introduces requirements for financial entities to prevent and mitigate cyber threats and enhance digital operational resilience.
  • DORA will apply in January 2025 and includes requirements on ICT risk management, incident reporting, digital operational resilience testing, information and intelligence sharing, and measures for the sound management of ICT third-party risk.

ESAs Published Draft Technical Standards under DORA

  • The ESAs published draft technical standards under DORA, and public consultation was launched in December 2023.

Crypto Regulation

Markets in Crypto-Assets regulation (MiCAR)

  • MiCAR entered into force in June 2023 and will apply in full from December 2024.
  • MiCAR provides for a full harmonisation of crypto-asset services, including transparency, authorisation, and disclosure requirements.

These regulations aim to enhance the resilience and stability of the financial sector, particularly in light of digitalization and emerging risks.