EBA to consider reporting requirements for non-bank entities

European Banking Authority Chairman Jose Manuel Campa said the watchdog could introduce reporting obligations for non-bank financial institutions as a “next step.”

Campa said the rapid expansion of the “shadow banking” sector, which includes hedge funds, private credit providers and insurers, meant there was a lack of transparency and potential problems that could spill over into broader financial markets, Reuters reported Tuesday (July 9).

“In my opinion, as we map, we will have difficulty identifying information,” Campa said, according to the report. “There will be black holes because at this stage there are no regulatory requirements for reporting.”

Non-bank financial institutions accounted for just under half of global financial assets, at $218 trillion, the report said, citing 2022 data. G20‘S Financial Stability Board (FSB).

Private lenders are also becoming an alternative source of financing for companies that have difficulty getting money from traditional banks.According to the report.

In 2022, these lenders extended an estimated $333 billion in loans, up 60% from the total amount extended in 2021, the report said, citing data from Alternative Credit Council (CCC).

The potential threat this sector poses to the broader financial system was illustrated until 2021 collapse Archegos Capital Management, a private investment fund that caused losses in one of the main banking systems, Credit Suisseaccording to the report.

Regulators are working on the issue but are trying to reach the consensus needed to establish international regulations.According to the report.

The FSB is collecting data on non-bank entities and their relationships with regulated lenders and will publish its findings later this year.the report stated.

In addition, Bank of England conducted its first sector-wide stress test and is currently working on new regulations, according to the report.

It has been reported In January, European regulators investigated links between banks and non-bank financial institutionswith Campa saying At that time there were concerns about the possibility of infection due to stress in greater system.

In February, the deputy governor of the Bank of England Sarah Breeden He told the conference that further research was needed non-bank lenders to prevent a “credit crisis” that could result from the withdrawal of hedge funds, pension funds, asset managers and insurers.

In June, It has been reported that the United States Federal Deposit Insurance Corp. (FDIC) takes action harder look at FinTechs, non-banking institutions and the risks associated with some of these companies.