The Financial Stability Board published a speech by Deputy Secretary General Martin Moloney setting out challenges for the quality of supervision in the European Union, given the EU’s predominant reliance on supervision and the complexity of its supervisory structures. Drawing lessons from the 2023 banking turmoil, he argued that strong rules are not sufficient if supervisors cannot compel firms to address risk management weaknesses, and suggested the FSB may need to do more globally on promoting supervisory quality. On cyber resilience, the speech pointed to rising EU financial sector reliance on cross-border critical third-party service providers, fragmented sectoral approaches within member states, and fragmented incident notification arrangements that can slow response times under the Digital Operational Resilience Act. It highlighted the need for comprehensive threat intelligence to be gathered nationally and shared centrally, noted the European Central Bank’s Threat Intelligence Based Ethical Red-teaming framework as a baseline for testing core financial infrastructure, and warned that inadequate testing can create false reassurance. The remarks also cited the value of using DORA registers to analyse third-party contracts for concentration and systemic risk channels, and referenced the FSB’s Cyber Incident Response toolkit and Format for Incident Reporting Exchange as tools aimed at reducing fragmented reporting and improving cross-border coordination. Separately, the speech noted that the EU Artificial Intelligence Act imposes advanced cybersecurity requirements on systemically risky general-purpose AI systems, with supervision by national competent authorities coordinated by the EU AI Office. On crypto-assets, Moloney referenced the European Systemic Risk Board’s Nonbank Financial Intermediation Risk Monitor highlighting intensifying interconnectedness between crypto and traditional finance alongside rising crypto valuations and stablecoin expansion. While welcoming the EU’s Markets in Crypto-Assets Regulation as a comprehensive framework for crypto-asset service providers, he emphasised the complexity of implementation given supervisory delegation to member states and the need for consistent supervision across 27 national competent authorities, including for cross-border business models and large global firms. The remarks also highlighted that products such as crypto-asset borrowing and lending fall outside MiCA’s scope, and cited the FSB’s 2024 crypto progress report in which 80% of member jurisdictions identified cross-border coordination and cooperation as a “very important” regulatory challenge.

Original source View in tracker