EBA To Probe Bank-NBFI Links, Aims to Enhance AML Measures in Crypto Sector
Summary:
The European Banking Authority (EBA) will partner with the Financial Stability Board (FSB) and the European Systemic Risk Board (ESRB) to investigate links between established banks and non-bank financial institutions (NBFIs). The investigation aims to understand the potential financial crisis contagion between banks and NBFIs. In 2023, the EBA proposed guidelines to counter Anti-Money Laundering and Terrorism Financing (AML/CFT) in the crypto sector, emphasizing the need for streamlined requirements and enhanced system compatibility.
The European Banking Authority (EBA), a banking regulator for the European Union, will collaborate with the Financial Stability Board (FSB) and the European Systemic Risk Board (ESRB) to evaluate the relationships between longstanding banks and non-bank financial institutions (NBFIs). These NBFIs include crypto platforms, private equity, and hedge funds. José Manuel Campa, the EBA's chair, made the announcement during a Financial Times interview on December 3. Campa stressed the necessity of understanding the full network within NBFIs in order to perceive the scope of potential contagion between bank and non-bank financial institutions during a financial crisis.
According to Campa, additional work should be done and will be done regarding this issue. The EBA already analyzed the exposure of bank balance sheets to NBFIs, including loans, Campa said while considering NBFIs as a "shadowy sector" characterized by inconsistent availability of data.
Reports by the FSB evaluate the total assets held by NBFIs at nearly $218 trillion, accounting for about 46% of total global assets. This is compared to the estimated $183 trillion owned by conventional banks.
In 2023, the EBA put forth new industry guidelines aimed at tackling Anti-Money Laundering and Terrorism Financing (AML/CFT) within the cryptocurrency sector. Specifically, the recommendations proposed by EBA include streamlining the AML/CFT requirements for payment service providers and those dealing with crypto assets (CASPs). The EBA also suggested that CASPs should ensure smooth and efficient information transmission by improving the compatibility of their systems.
Published At
1/4/2024 12:51:13 PM
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