EU Launches Probe Into Connections Between Banks and Non-Bank Entities, Including Crypto Companies: Report

European Union regulators are launching an investigation into the intricate relationships between banks and non-bank financial institutions (NBFIs) due to concerns that stress within these shadow banks might spill over into the broader financial system. 

José Manuel Campa, Chair of the European Banking Authority (EBA), plans to enhance efforts to predict the impact of NBFI strains on banks. With NBFIs, including hedge funds, private capital firms, and crypto groups, holding a substantial $218 trillion—almost half of the world’s financial assets—the EBA aims to collaborate with the European Systemic Risk Board (ESRB) and the Financial Stability Board (FSB) to understand potential financial contagion from shadow banking shocks. 

Campa underscores the importance of a comprehensive understanding of the entire NBFI chain, exploring both direct and indirect connections. The initiative seeks to establish robust reporting mechanisms for transparent data on non-bank exposures, recognizing the challenges posed by the heterogeneous quality of data in this relatively opaque sector.

Clever Robot News Desk 5^th January 2024