Page 75 - EBA 2015.1815 Annual report 2014 web 2

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monetary amount of Professional Indemnity
Insurance [PII] or comparable guarantee for
mortgage credit intermediaries and fulfilled
the first consumer protection mandate it has
received from the EU institutions, which was
provided for in Article 29 of the MCD. The RTS
set the minimum monetary amount of the PII
or comparable guarantee for mortgage credit
intermediaries by specifying an amount for
each individual claim (EUR 460 000) and an
aggregate amount per calendar year for all
claims (EUR 750 000). Based on the RTS, the
EC adopted a delegated regulation (EU) No
1125/2014 on 19 September 2014 and pub-
lished in the Official Journal of the European
Union on 24 October 2014.
Monitoring financial innovation
After issuing a warning on a series of risks de-
riving from buying, holding or trading virtual
currencies such as bitcoins in December 2014,
the EBA further investigated whether virtual
currencies can and ought to be regulated. In
the Opinion the EBA published in June 2014,
it assessed the potential benefits of virtual
currencies, such as faster and cheaper trans-
actions, financial inclusion as well as contri-
butions to economic growth; and also identi-
fied more than 70 risks for users and market
participants, risks related to financial integrity,
such as money laundering and other financial
crimes, and risks for existing payments in
conventional currencies.
The causes for these risks were also investi-
gated by the EBA. These include that a virtual
currency scheme can be created — and its
function subsequently changed — by anyone,
and in the case of decentralised schemes,
such as bitcoins, by anyone with a sufficient
share of computational power, and anony-
mously so. The EBA also added that individu-
als validating transactions (so-called miners)
can also remain anonymous, and so can pay-
ers and payees; IT security cannot be guaran-
teed; and the financial viability of some mar-
ket participants remains uncertain.
Based on this assessment, the EBA concluded
that a regulatory approach to address these
risks would require a substantial body of regu-
lation, some components of which would need
to be developed in more detail. In particular, a
regulatory approach would need to cover gov-
ernance requirements for several market par-
ticipants, the segregation of client accounts,
capital requirements and, most importantly,
the creation of ‘scheme governing authorities’
accountable for the integrity of a particular vir-
tual currency scheme and its key components,
including its protocol and transaction ledger.
Such a framework is best developed by the
Commission, Parliament and Council, which
is why the EBA Opinion is primarily addressed
to them and outlines the elements that such a
framework should comprise.
However, considering that it would take some
time to develop such a regime, and that some
of the risks have already materialised, the EBA
Ongoing activity
In 2015, the EBA will continue with the implementation of
the mandates conferred on it in the PAD. It will also final-
ise the draft guidelines on which it had consulted in the
previous year, on the product oversight and governance;
creditworthiness assessments for mortgage borrowers;
and arrears and foreclosure. Further work will focus on
remuneration requirements for staff that interact with
consumers.
Ongoing activity
The EBA will continue to monitor innovative products or innovative uses of exist-
ing products to ensure that consumers, investors and depositors are protected;
and that the financial system is stable and effective. In accordance with the
Regulation on MiFIR, the EBA will also monitor the market for structured depos-
its which are marketed, distributed or sold in the Union.