The European Banking Authority (EBA) published today an Opinion addressed to the European Parliament, Council and European Commission, on matters relating to the regulatory perimeter under the Capital Requirements Directive/Regulation (CRDIV/CRR). These include the use of Articles 2(5) and 9(2) CRDIV and the interpretation of the terms 'financial institution' and 'ancillary services undertaking' as defined in the CRR. The Opinion is based on the results of a detailed assessment across the EU of the prudential treatment of 'other financial intermediaries' (OFIs), i.e. those entities carrying out credit intermediation activities that are not credit institutions nor other specified types of financial entity. The results of this assessment are included in a Report also published today. The EBA's findings are relevant to the consideration of the legislative proposals to amend the CRDIV/CRR.
In view of the need for the regular monitoring of credit intermediation activities outside the traditional banking sector and other developments such as the emergence of FinTech, the EBA has undertaken a comprehensive analysis of issues relating to the regulatory perimeter further to the 2014 EBA Opinion and Report
on the perimeter of credit institutions.
In terms of the overall scope of the CRDIV/CRR, the EBA observes that Article 2(5) CRDIV (the list of entities excluded from scope, such as central banks and post office giro institutions) remains valid and requires minor update. Also Article 9(2) CRDIV (other exclusions, including where provided for under national law) also appears to continue to have relevance in the Member States and any amendment thereto should be substantiated by a prior and thorough impact assessment.
As for the terms 'financial institution' and 'ancillary services undertaking', which are crucial for the purposes of establishing the scope of prudential consolidation, the EBA observes that these terms are prone to inconsistent interpretation across the EU leading to potential divergences in the application of regulatory consolidation rules. This has been highlighted also in the EBA's Consultation Paper on draft RTS on methods of consolidation
, published today, and previously in the Authority's reply to the European Commission's request for an overview of possible errors and inconsistencies in the CRDIV and CRR observed via the Single Rulebook Q&A tool
. The EBA urges the EU institutions to give consideration to further possible amendments to the definitions of these terms in order to ensure the consistent treatment of prudential risks and to promote the level playing field.
The EBA observes that Annex I to the CRDIV, which enlists the activities subject to mutual recognition (i.e. activities that credit institutions and financial institutions are permitted to carry out throughout the EU by establishing branches or the cross-border provision of services), has been largely unchanged for 30 years and urges the EU institutions to give consideration to clarifications and updates to the Annex.
Finally, the EBA observes significant variation in the prudential treatment of OFIs (e.g. consumer and corporate lenders and securitisation vehicles) under national law. Although the EBA does not make any specific recommendations at this stage as to the scope of individual prudential regulation under EU law, the Authority notes the need to continue its monitoring work, including in conjunction with the European Systemic Risk Board (ESRB) as part of the annual shadow banking monitoring exercises.
The EBA stands ready to undertake further analytical work on the matters identified in the Opinion and Report.
The EBA has drafted this Opinion on its own initiative in accordance with Article 34(1) of Regulation (EU) No 1093/2010.