EBA Proposes Regulatory Standards to Identify Shadow Banking Entities
The European Banking Authority (EBA) proposed regulatory technical standards that set out criteria for identifying shadow banking entities for the purpose of reporting large exposures. Entities that offer banking services and perform banking activities as defined in the draft regulatory technical standards but are not regulated and are not being supervised in accordance with any of the acts that form the regulated framework are identified as shadow banking entities. The consultation period ends on October 26, 2021 and the proposed standards will be submitted to the European Commission by December 2021 for endorsement. Following the European Commission endorsement, these standards will be subject to scrutiny by the European Parliament and the Council, before being published in the Official Journal of the European Union.
Article 394(4) of the Capital Requirements Regulation (CRR or Regulation 575/2013) requires EBA to develop draft regulatory technical standards to specify the criteria for the identification of shadow banking entities. The main basis for development of these draft regulatory standards has been the guidelines on limits on exposures to shadow banking entities, which carry out banking activities outside a regulated framework. These guidelines were published in December 2015 to give effect to the mandate of Article 395(2) of CRR. The draft regulatory technical standards address three main legal provisions addressing the:
- Criteria for identifying both shadow banking and non-shadow banking entities
- Definition of banking activities and services
- Criteria for excluding entities established in third countries from being deemed as shadow banking entities
Considering the characteristics of funds regulated under the Undertakings for the Collective Investment in Transferable Securities (UCITS) Directive and the Alternative Investment Fund Managers (AIFM) Directive, special provisions have been included in the draft regulatory standards. In view of the severe liquidity issues that affected money market funds during the COVID-19 crisis and the ongoing discussions at EU and international levels to strengthen their regulation, money market funds are identified as shadow banking entities. The draft regulatory technical standards consider the situation of entities established in third countries and provide for a treatment that distinguishes between banks and other entities.
In case of entities established in a third country, the proposed regulatory standards differentiate between banks and other entities: banks would not be identified as shadow banking entities provided that they are authorized and supervised by a supervisory authority that applies banking regulation and supervision based on at least the Basel core principles for effective banking supervision; other entities would not be identified as shadow banking entities provided that they are subject to a regulatory regime
recognized as equivalent to the one applied in the European Union for such entities, in accordance with the equivalence provisions of the relevant European Union legal act.
Related Links
Comment Due Date: October 26, 2021
Keywords: Europe, EU, Banking, Shadow Banking, Regulatory Technical Standards, CRR, Large Exposures, Basel, Reporting, Money Market Funds, NBFI, EBA
Featured Experts

María Cañamero
Skilled market researcher; growth strategist; successful go-to-market campaign developer

Nicolas Degruson
Works with financial institutions, regulatory experts, business analysts, product managers, and software engineers to drive regulatory solutions across the globe.

Patrycja Oleksza
Applies proficiency and knowledge to regulatory capital and reporting analysis and coordinates business and product strategies in the banking technology area
Previous Article
BOM Proposes Guidelines on Use of Cloud Services and Private BankingRelated Articles
EBA Clarifies Use of COVID-19-Impacted Data for IRB Credit Risk Models
The European Banking Authority (EBA) published four draft principles to support supervisory efforts in assessing the representativeness of COVID-19-impacted data for banks using the internal ratings based (IRB) credit risk models.
BIS Hub Updates Work Program for 2022, Announces New Projects
The Bank for International Settlements (BIS) Innovation Hub updated its work program, announcing a set of projects across various centers.
US Senate Members Seek Details on SEC Proposed Climate Disclosure Rule
Certain members of the U.S. Senate Committee on Banking, Housing, and Urban Affairs issued a letter to the Securities and Exchange Commission (SEC)
EIOPA Consults on Review of Securitization Framework in Solvency II
The European Insurance and Occupational Pensions Authority (EIOPA) published a consultation paper on the advice on the review of the securitization prudential framework in Solvency II.
UK Authorities Issue Regulatory and Reporting Updates for Banks
The Prudential Regulation Authority (PRA) issued a statement on PRA buffer adjustment while the Bank of England (BoE) published a notice on the statistical reporting requirements for banks.
BaFin Consults on Resolvability Requirements for Resolution Planning
The Federal Financial Supervisory Authority of Germany (BaFin) proposed to amend the “Capital Investment Conduct And Organization Ordinance” and issued a draft circular on the minimum resolvability requirements for resolution planning.
EBA Consults on Certain Standards and Guidelines Under CRR and BRRD
The European Banking Authority (EBA) proposed guidelines, for the resolution authorities, on the publication of the write-down and conversion and bail-in exchange mechanic, with the comment period ending on September 07, 2022.
OJK Publishes Regulatory Updates for Financial Sector Entities
The Financial Services Authority of Indonesia (OJK) is strengthening cooperation with the Australian Prudential Regulation Authority (APRA) and the Japanese Financial Services Agency (JFSA)
EU Publishes Rules on DLT and Data Governance
The European Parliament and the Council published Regulation 2022/868 on European data governance (Data Governance Act).
EBA Publishes Phase 2 of Reporting Framework 3.2
The European Banking Authority (EBA) published phase 2 of its reporting framework 3.2. The technical package supports the implementation of the updated reporting framework by providing standard specifications