Shearman & Sterling LLP | FinReg | European Banking Authority Publishes Opinion on Regulatory Perimeter Issues under the EU Capital Requirements Framework
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  • European Banking Authority Publishes Opinion on Regulatory Perimeter Issues under the EU Capital Requirements Framework

    The European Banking Authority has published an Opinion and a Report on financial intermediaries and regulatory perimeter issues under the Capital Requirements Regulation and the Capital Requirements Directive. The Opinion and Report are a result of the EBA's up-to-date analysis of issues relating to non-bank financial intermediaries (referred to by the EBA as other financial intermediaries or OFIs) and the scope of EU-level and national prudential regulation. The Opinion and the Report provides the EBA's assessment of the use of the exemptions for certain entities from the CRDIV requirements, national approaches to prudential supervision of OFIs, the ambiguities around the definitions of "ancillary services undertaking" and "financial institution" in CRR and the need to update the list of activities that are part of the EU passporting regime.

    The Opinion sets out the EBA's view on issues arising under the EU capital requirements framework that the European Commission, European Parliament and Council of the European Union should consider further in their current deliberations over the proposed amendments to the CRR and CRD.

    CRD gives member states the discretion to exempt entities (such as saving companies, structured finance vehicles and hire purchase providers) that are not banks but which take deposits and other repayable funds from the public, provided that those entities are expressly covered by national law. The EBA considers that the proposal to remove that national discretion needs to be further substantiated by an impact assessment because some member states rely on it and because it may be too burdensome for these entities to become licensed as a bank.

    The EBA notes that the prudential treatment of OFIs differs between member states and that some member states apply requirements similar to CRDIV whereas others apply bespoke requirements or no prudential requirements at all. The EBA does not recommend any regulatory intervention or a change to the scope of the EU framework but states that the regulatory treatment of OFIs should continue to be monitored closely. This position is in line with the EBA's 2014 Opinion and Report on the regulatory perimeter applying to banks and the prudential treatment of OFIs.

    On the definitions of "financial institution" and "ancillary services undertaking", the EBA notes the Commission's attempts to clarify a number of issues that the EBA has highlighted in the past through Q&A and reports to the Commission. The EBA considers that there is a risk that regulatory consolidation rules could be inconsistently applied across the EU as a result of ambiguities in the interpretation of these terms. The EBA appeals to the EU legislative institutions to consider further possible amendments to these definitions. The EBA also considers that the list of activities that fall within the EU's passporting regime needs to be updated and that the changes could be considered in the current legislative debate.

    View the Opinion.

    View the EBA’s Report.

    View the Commission’s Proposals for CRDV.

    View the EBA’s 2014 Opinion and Report.