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20 March 2015

EBA consults on exposures to shadow banking

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The document lays out a qualitative approach for institutions to develop their internal policies for monitoring and setting appropriate limits.

These guidelines will also help inform the Commission's work in relation to its report on the appropriateness and impact of imposing limits on exposures to shadow banking entities under Article 395(2) of the Capital Requirements Regulation (CRR). The consultation runs until 19 June 2015.

The EBA's Guidelines propose criteria which shall help EU institutions implement effective processes to set limits on exposures to shadow banking entities, at both aggregate and individual level. The approach aims, first of all, at ensuring that institutions have sufficient information about their counterparties in the shadow banking sector, so they can make informed decisions about their exposures to the sector in general, as well as to individual shadow banking entities.

The Guidelines also cater for those institutions that lack sufficient level of information on their exposures to shadow banking or the capacity to use such information. In this case, the Guidelines foresee a simpler approach which provides that those institutions shall set an aggregate limit of 25% of their eligible capital.

In the absence of a definition of ‘shadow banking entities' ‘banking activities' and ‘regulated framework' in EU banking legislation (CRR and CRD), the EBA proposes in its Guidelines a definition that allows capturing entities that are not subject to appropriate and sufficiently robust prudential supervision and therefore pose the greatest risks. The definitions proposed are in line with the previous EBA Opinion and Report on the perimeter of credit institutions.

Comments to this consultation can be sent to the EBA by 19 June 2015. A public hearing will take place at the EBA premises on 28 May 2015 from 14:00 to 17:00 UK time.

Press release

Consultation paper


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