RTS on stress test programmes

Where a competent authoritymeans one or more authorities:designated by each Member State in accordance with Article 93 concerning offerors, persons seeking admission to trading of crypto-assets other than asset-referenced tokens and e-money tokens, issuers of asset-referenced tokens, or crypto-asset service providers;designated by each Member State for the application of Directive 2009/110/EC concerning issuers of e-money tokens; requires an increase in own fundsmeans funds as defined in Article 4, point (25), of Directive (EU) 2015/2366; requirements of the issuermeans a natural or legal person, or other undertaking, who issues crypto-assets; of tokens, the timeframe provided to comply with such increase should be as short as possible since the relevant issuermeans a natural or legal person, or other undertaking, who issues crypto-assets;, applying a proper and effective risk management, should always be adequately capitalised for the risks they face.

Where a competent authoritymeans one or more authorities:designated by each Member State in accordance with Article 93 concerning offerors, persons seeking admission to trading of crypto-assets other than asset-referenced tokens and e-money tokens, issuers of asset-referenced tokens, or crypto-asset service providers;designated by each Member State for the application of Directive 2009/110/EC concerning issuers of e-money tokens; concludes that the risks, including volatility, of a particular asset-referenced tokenmeans a type of crypto-asset that is not an electronic money token and that purports to maintain a stable value by referencing another value or right or a combination thereof, including one or more official currencies; or e-money token might lead to a significant deterioration of the financial situation of the relevant issuermeans a natural or legal person, or other undertaking, who issues crypto-assets; or impact its financial stability, the competent authoritymeans one or more authorities:designated by each Member State in accordance with Article 93 concerning offerors, persons seeking admission to trading of crypto-assets other than asset-referenced tokens and e-money tokens, issuers of asset-referenced tokens, or crypto-asset service providers;designated by each Member State for the application of Directive 2009/110/EC concerning issuers of e-money tokens; should set a shorter timeframe for the relevant issuermeans a natural or legal person, or other undertaking, who issues crypto-assets; to increase the own fundsmeans funds as defined in Article 4, point (25), of Directive (EU) 2015/2366;.

To ensure that issuersmeans a natural or legal person, or other undertaking, who issues crypto-assets; of asset-referenced tokensmeans a type of crypto-asset that is not an electronic money token and that purports to maintain a stable value by referencing another value or right or a combination thereof, including one or more official currencies; or e-money tokens make sound risk management decisions, such issuersmeans a natural or legal person, or other undertaking, who issues crypto-assets; and their relevant competent authoritiesmeans one or more authorities:designated by each Member State in accordance with Article 93 concerning offerors, persons seeking admission to trading of crypto-assets other than asset-referenced tokens and e-money tokens, issuers of asset-referenced tokens, or crypto-asset service providers;designated by each Member State for the application of Directive 2009/110/EC concerning issuers of e-money tokens; should understand the financial and operational risks that come with increased use of asset-referenced or e-money tokens. In addition, they should consider interlinkages with ecosystem of issuersmeans a natural or legal person, or other undertaking, who issues crypto-assets; of tokens more broadly and inherent interconnectedness with the traditional financial sector stemming from reserves of assetsmeans the basket of reserve assets securing the claim against the issuer; held. Therefore, it is necessary to further specify the stress testing of the solvency and liquidity risk of issuersmeans a natural or legal person, or other undertaking, who issues crypto-assets;.

The impact of the so called ‘run-risk’, meaning a sudden spike in redemption requests of the tokens, resulting in a fire sale of the reserve assets backing the tokens, should be analysed via liquidity stress-testing. It is, therefore, essential to specify minimum features of the liquidity stress-testing such as those related to governance, data infrastructure, risk categorisation and frequency.

To ensure that the results of the stress test remain relevant, solvency stress test should be carried out on a quarterly basis for issuersmeans a natural or legal person, or other undertaking, who issues crypto-assets; of significant asset-referenced tokensmeans a type of crypto-asset that is not an electronic money token and that purports to maintain a stable value by referencing another value or right or a combination thereof, including one or more official currencies; or e-money tokens, and on a semi-annual basis for issuersmeans a natural or legal person, or other undertaking, who issues crypto-assets; of non-significant asset-referenced tokensmeans a type of crypto-asset that is not an electronic money token and that purports to maintain a stable value by referencing another value or right or a combination thereof, including one or more official currencies; or e-money tokens. The liquidity stress test should be carried out monthly.

The stress testing should consider severe but plausible financial stress scenarios and non-financial stress scenarios, such as liquidity shocks, credit shocks, interest rate and exchange shocks, redemption risk and operational and third-party shocks. It should also ensure that the internal governance arrangements and the relevant data infrastructures are in place to allow issuersmeans a natural or legal person, or other undertaking, who issues crypto-assets; of asset-referenced tokensmeans a type of crypto-asset that is not an electronic money token and that purports to maintain a stable value by referencing another value or right or a combination thereof, including one or more official currencies; or e-money tokens and competent authoritiesmeans one or more authorities:designated by each Member State in accordance with Article 93 concerning offerors, persons seeking admission to trading of crypto-assets other than asset-referenced tokens and e-money tokens, issuers of asset-referenced tokens, or crypto-asset service providers;designated by each Member State for the application of Directive 2009/110/EC concerning issuers of e-money tokens; to understand the characteristics, quantify risks and gather evidence that such issuersmeans a natural or legal person, or other undertaking, who issues crypto-assets; are effectively allocating and mitigating risk on an ongoing basis.

As a guiding principle, the stress testing programmes should follow similar rules and approach as to credit institutionsmeans a credit institution as defined in Article 4(1), point (1), of Regulation (EU) No 575/2013 and authorised under Directive 2013/36/EU; stress testing under Directive 2013/36/EU of the European Parliament and of the Council(²)Directive 2013/36/EU of the European Parliament and of the Council of 26 June 2013 on access to the activity of credit institutions and the prudential supervision of credit institutions, amending Directive 2002/87/EC and repealing Directives 2006/48/EC and 2006/49/EC (OJ L 176, 27.6.2013, p. 338, ELI: http://data.europa.eu/eli/dir/2013/36/oj).. However, considering that the risks of crypto-assetmeans a digital representation of a value or of a right that is able to be transferred and stored electronically using distributed ledger technology or similar technology; activities provided by issuersmeans a natural or legal person, or other undertaking, who issues crypto-assets; of asset-referenced tokensmeans a type of crypto-asset that is not an electronic money token and that purports to maintain a stable value by referencing another value or right or a combination thereof, including one or more official currencies; or e-money tokens other than credit institutionsmeans a credit institution as defined in Article 4(1), point (1), of Regulation (EU) No 575/2013 and authorised under Directive 2013/36/EU; are different to those of credit institutionsmeans a credit institution as defined in Article 4(1), point (1), of Regulation (EU) No 575/2013 and authorised under Directive 2013/36/EU;, it is necessary to group the crypto-assetmeans a digital representation of a value or of a right that is able to be transferred and stored electronically using distributed ledger technology or similar technology; activities into different risk categories for the purpose of the stress testing. Furthermore, grouping the crypto-assetmeans a digital representation of a value or of a right that is able to be transferred and stored electronically using distributed ledger technology or similar technology; activities and risks should ensure that issuersmeans a natural or legal person, or other undertaking, who issues crypto-assets; of the relevant tokens and competent authoritiesmeans one or more authorities:designated by each Member State in accordance with Article 93 concerning offerors, persons seeking admission to trading of crypto-assets other than asset-referenced tokens and e-money tokens, issuers of asset-referenced tokens, or crypto-asset service providers;designated by each Member State for the application of Directive 2009/110/EC concerning issuers of e-money tokens; are able to identify all the functions, processes, and actors, along with their associated risks including any environmental, social, and governance factors, and identify any potential issues or risks. These identifications should facilitate the design and assignment of specific risk scenarios presented in the different activities of the relevant issuermeans a natural or legal person, or other undertaking, who issues crypto-assets;. The scenarios should be well-defined in order to quantify their potential impact, the range of potential losses and the range of plausibility associated with the specific risk scenarios identified. Therefore, when identifying specific risks, the relevant issuermeans a natural or legal person, or other undertaking, who issues crypto-assets; should specify the timeline of the stress scenario, which should be three years for the solvency stress test and up to one year for the liquidity stress test.

This Regulation is based on the draft regulatory technical standards submitted to the Commission by the European Banking Authority (EBA).

The EBA has conducted open public consultations on the draft regulatory technical standards upon which this Regulation is based, analysed the potential related costs and benefits and requested the advice of the Banking Stakeholder Group established in accordance with Article 37 of Regulation (EU) No 1093/2010 of the European Parliament and of the Council(³)Regulation (EU) No 1093/2010 of the European Parliament and of the Council of 24 November 2010 establishing a European Supervisory Authority (European Banking Authority), amending Decision No 716/2009/EC and repealing Commission Decision 2009/78/EC (OJ L 331, 15.12.2010, p. 12, ELI: http://data.europa.eu/eli/reg/2010/1093/oj).,