EU Authorities Investigate Bank-NBFI Relationships, Including Cryptocurrencies
The European Banking Authority (EBA) and the European Systemic Risk Board (ESRB) have launched a significant investigation into the complex relationships that exist between traditional banks and non-bank financial institutions (NBFIs). Fast development. Significant concerns have been raised about the potential systemic risks that such linkages could pose, particularly in times of severe fiscal pressure. The move highlights growing concerns.
Nearly half of global financial assets, estimated at $219 trillion, are currently held by non-bank financial institutions (NBFIs), including hedge funds, private equity funds, money market funds, and cryptocurrency companies. As a result of this rapidly growing industry, new dynamics have been introduced to the financial ecosystem, which simultaneously provide benefits associated with diversification while also creating new challenges. In particular, the proliferation of digital currencies has attracted the attention of investors as well as scrutiny from regulators. With the recently implemented Markets in Cryptocurrency Assets (MiCA) law, the European Union is seeking to align its member countries’ cryptocurrency frameworks with each other.
The European Banking Authority (EBA), which conducts stress tests on EU banks every two years, is increasingly paying attention to the possible contagion impact of non-bank financial institutions (NBFIs). José Manuel Campa, chairman of the European Banking Authority, said he needed to understand “the entire underlying chain of NBFIs” to assess the impact a shock to shadow banking could have on the wider financial system. emphasized the need for Accordingly, the European Banking Authority (EBA) has proposed regulations to ensure thorough due diligence and transaction monitoring for cryptocurrency companies and drafted guidelines aimed at this. liquidity Capital requirements for stablecoin issuers.
The European Bank for Economic Cooperation (EBA) and the European Stock Exchange (ESRB) are working together to analyze the complex web of relationships that exist between banks and non-bank financial institutions (NBFIs). This measure stems from concerns that the stress in the non-banking financial institutions (NBFI) sector, such as cryptocurrency, hedge funds, and private capital groups, may spread to the banking sector and lead to a further financial crisis. Systematic difficulties. Campa noted that although direct links between banks and non-banks have been evaluated, indirect transmission mechanisms also remain an important topic of research. The investigation is part of global efforts to regulate the shadow banking industry and reduce risks to financial system stability.
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