Banks will have to set aside a punitive amount of capital to cover holdings of crypto assets under a bill that lawmakers are set to vote on Tuesday.
The European Parliament’s Economic Affairs Committee is set to vote on a cross-party compromise bill that implements the remaining elements of Basel III, a global pact that forces banks to hold more capital to counter market shocks without the help of taxpayers.
One of the amendments states that banks will have to apply a risk weight of 1,250% of capital to crypto-asset exposure, which means enough to cover the full loss of their value.
This is in line with the recommendations of the Basel Global Committee of Banking Regulators in December.
The amendments also introduced a definition of “shadow banking,” the broad sector of insurance companies, hedge funds and investment funds that make up about half of the global financial system and are usually less regulated than banks.
The amendment requires the European Union’s executive European Commission to publish a report by June 2023 analyzing the possibility of placing prudential limits on banks’ exposure to shadow banks.
The amendments also require banks’ renewal policies to be in line with their transitional plans to address environmental, social and governance (ESG) risks in the short, medium and long term.
The bill introduces a new “appropriate and sound” system for appointing bankers, with amendments stating that there should be targets for the bank’s governing body.
They must be “enough diversified in terms of age, gender, geographic and educational background” according to a report from Jonas Fernandez, a member of the committee leading negotiations on the bill in parliament.
The adjustments generally go further than changes by EU countries, which reached an agreement among themselves in December and that have generally focused on temporary cuts to some requirements to give banks more time to adjust, in the face of opposition from the ECB.
After Tuesday’s vote, lawmakers and EU countries will conclude a final agreement that will take effect in 2025.