The European Banking Authority, in collaboration with the European Systemic Risk Board and the Financial Stability Board, will conduct an inquiry.

The European Banking Authority

The European Banking Authority (EBA) will look into the connections between traditional banks and non-bank financial institutions (NBFIs).

The European Union’s financial regulators, the European Systemic Risk Board (ESRB), and the Financial Stability Board (FSB), will evaluate hedge funds, private equity, and cryptocurrency platforms.

The EBA’s chair, José Manuel Campa, stated the intention in a Financial Times interview on January 3. Campa argues that the entire “underlying chain in NBFIs” should be traced in order to comprehend the magnitude of the potential for contagion between banking and non-banking financial institutions in a stress situation:

“We should be doing more, and we will be doing more.” We need to comprehend the entire underlying chain in NBFIs.”

According to the executive, the EBA has already reviewed the banks’ balance-sheet exposures to non-banks, including loans. He considers NBFIs to be an “obscure sector” with “not-homogenous” data quality.

According to the FSB, the overall value of assets owned by NBFIs is close to $218 trillion, accounting for around 46% of total worldwide assets. Traditional banks, on the other hand, have approximately $183 trillion in assets.

The EBA recommended new industry recommendations for Anti-Money Laundering and Combating the Financing of Terrorism (AML/CFT) in the crypto sector in November 2023. The EBA specifically advised combining AML/CFT requirements for payment service providers and crypto asset service providers (CASPs). It also advocated requiring CASPs to “enable the transmission of information in a seamless and interoperable manner” via improving protocol interoperability.