EU regulators will investigate banks’ exposure to crypto

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The European Union’s banking regulator, the European Banking Authority (EBA), will conduct a joint investigation with the European Systemic Threat Board (ESRB) and Monetary Stability Board (FSB) to evaluate the interconnectedness of legacy banks with non-bank monetary establishments (NBFIs), together with hedge funds, personal fairness and crypto platforms. 

The intention was introduced by the chair of EBA, José Manuel Campa, in a Dec. 3 interview with the Monetary Occasions. Campa believes that the entire “underlying chain in NBFIs” ought to be traced to grasp the size of the potential for contagion between banking and non-banking monetary establishments in a stress scenario:

“We ought to be doing extra and we’re going to be doing extra. We have to have an understanding of the entire underlying chain in NBFIs.”

The manager revealed that the EBA had already assessed the banks’ steadiness sheet exposures to non-banks, together with loans. He believes the NBFIs to be an “obscure sector” with a “not-homogenous” high quality of obtainable information. 

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In accordance with the FSB estimate, the entire worth of belongings held by the NBFIs is near $218 trillion, which includes the foremost share of complete world belongings, round 46%. Compared, conventional banks possess round $183 trillion.

In November 2023, the EBA proposed new trade pointers for Anti-Cash Laundering and Combating the Financing of Terrorism (AML/CFT) in the crypto sector. Particularly, the EBA prompt merging the AML/CFT standards for cost service suppliers and crypto asset service suppliers (CASPs). It additionally proposed obliging CASPs to “allow the transmission of data in a seamless and interoperable method” by enhancing the interoperability of their protocols.

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