EBA Prudential Framework

Definition ∞ The EBA Prudential Framework refers to the regulatory guidelines and standards issued by the European Banking Authority to ensure the financial stability and soundness of banks and investment firms within the European Union. These rules establish capital requirements, liquidity standards, and risk management practices for traditional financial institutions. The framework is now being adapted to address the unique risks presented by digital assets and crypto-related activities.
Context ∞ The EBA is actively working to integrate digital asset risks into its existing prudential framework, which is a critical step for banks seeking to engage with cryptocurrencies. Current discussions involve determining appropriate capital treatment for crypto exposures, establishing robust risk management processes, and ensuring supervisory consistency across member states. Future updates to the framework are expected to provide more specific guidance on stablecoin reserves, crypto custody, and other digital asset services to mitigate potential financial stability concerns.