U.K. Banks Warned Not to Get Caught With Pants Down on Crypto
(Bloomberg) -- The Bank of England warned U.K. lenders to do their homework before diving into the business of crypto currencies.
Banks are putting their reputations on the line when dealing with these volatile, relatively illiquid assets, and must ensure that their risk-management is up to speed, Sam Woods, head of the BOE’s Prudential Regulation Authority, said in a letter to chief executives on Thursday. Among the options under consideration is a firm-specific capital charge for crypto-assets, he said.
Woods said authorities around the world are trying to figure out how to fit Bitcoin and its offspring into existing capital and liquidity rules. The potential role of crypto currencies in money laundering and terrorist financing has long been a concern for law enforcement, and a string of exchanges has been hacked, resulting in losses of millions of dollars.
- Woods says a senior manager approved by the PRA should “be involved actively in reviewing and signing off on the risk assessment framework for any planned business direct exposure to crypto-assets and/or entities heavily exposed to crypto-assets”
- Remuneration policies shouldn’t encourage excessive risk-taking on crypto, PRA says
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