- EBA’s joint investigation with ESRB and FSB aims to assess the interlinks between legacy banks and NBFIs.
- EBA Chair, José Manuel Campa, emphasizes the need to understand the entire chain of NBFIs to gauge potential contagion risks.
- NBFIs, including crypto platforms, represent an “obscure sector” with heterogeneous data quality.
- The FSB estimates NBFIs’ total assets at nearly $218 trillion, constituting approximately 46% of global assets.
The Investigation’s Rationale:
José Manuel Campa underscores the importance of comprehending the underlying chain of NBFIs, recognizing them as an intricate sector with diverse and sometimes opaque data. The investigation seeks to delve into potential contagion risks and stress test scenarios that could unfold between traditional banks and NBFIs.
Global Scale of NBFIs:
The FSB’s estimate of nearly $218 trillion in assets held by NBFIs highlights their substantial presence, accounting for 46% of total global assets. In comparison, traditional banks hold around $183 trillion in assets. This data underscores the significance of scrutinizing the relationships and dependencies between these entities.
Regulatory Initiatives and Crypto Sector Focus:
In November 2023, the EBA proposed new industry guidelines for Anti-Money Laundering and Combating the Financing of Terrorism (AML/CFT) within the crypto sector. The proposal includes merging AML/CFT criteria for payment service providers and crypto asset service providers (CASPs). Moreover, CASPs are urged to enhance interoperability of their protocols for seamless information transmission.
Conclusion: As the EBA, ESRB, and FSB initiate a collaborative examination, the financial industry braces for a thorough assessment of the ties between legacy banks and NBFIs. The investigation aims to enhance transparency, risk management, and regulatory frameworks, especially in the evolving landscape of crypto platforms. Stay tuned for updates on this critical exploration of financial interconnectedness.
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