The European Banking Authority (EBA) has announced plans to investigate the interconnectedness of traditional banks with non-bank financial institutions (NBFIs), including hedge funds, private equity, and cryptocurrency platforms. José Manuel Campa, the chair of EBA, revealed this intention in a January 3 interview with the Financial Times. The investigation, conducted in collaboration with the European Systemic Risk Board (ESRB) and the Financial Stability Board (FSB), aims to assess the potential for contagion between banking and non-banking financial institutions during stressful situations.
Campa emphasized the need to understand the entire underlying chain in NBFIs, considering them as an “obscure sector” with data of varying quality and non-homogeneity. The EBA has already evaluated banks’ balance sheet exposures to non-banks, including loans. The total value of assets held by NBFIs, estimated by the FSB, is around $218 trillion, accounting for approximately 46% of total global assets. In comparison, traditional banks hold about $183 trillion.
The move comes after the EBA proposed new industry guidelines in November 2023 for Anti-Money Laundering and Combating the Financing of Terrorism (AML/CFT) in the crypto sector. These guidelines suggested merging AML/CFT criteria for payment service providers and crypto asset service providers (CASPs) and obliging CASPs to enhance the interoperability of their protocols to enable seamless information transmission.
Get $200 Free Bitcoins every hour! No Deposit No Credit Card required. Sign Up