The European Banking Authority (EBA) has published final guidelines on limits on exposure to shadow banking entities that carry out banking activities outside the regulated framework under article 395(2) of the Capital Requirements Regulation (CRR).
The guidelines aim to support institutions and banking supervisors across the EU in minimising the risks arising from exposures to entities that carry out bank-like activities outside regulated frameworks by laying down requirements for institutions to set limits, as part of their internal processes, on their individual and aggregate exposures to shadow banking entities.
The EBA notes that in the absence of a definition in the CRR of the terms ‘shadow banking entities’, ‘banking activities’ and ‘regulated framework’, it was necessary to develop a definition of those terms for the purposes of the guidelines. For the purposes of the guidelines ‘shadow banking entities’ are defined as entities that carry out credit intermediation activities (i.e. bank-like activities involving maturity transformation, liquidity transformation, leverage, credit risk transfer or similar activities) without falling within the scope of consolidated supervision (or equivalent third country legal frameworks).
The guidelines will apply from 1 January 2017.