Consultation on draft RTS on criteria for the identification of shadow banking entities

The European Banking Authority (EBA) launched today a public consultation on draft regulatory technical standards (RTS) setting out criteria for the identification of shadow banking entities for the purposes of reporting large exposures. The consultation runs until 26 October 2021.

Entities that offer banking services and perform banking activities as defined in the draft RTS 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.

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 are included in the draft RTS. In view of the severe liquidity issues that affected money market funds (MMFs) during the COVID-19 crisis and the ongoing discussions at EU and international level to strengthen their regulation, MMFs are identified as shadow banking entities.

Finally, the draft RTS consider the situation of entities established in third countries and provide for a treatment that distinguishes between banks and other entities.

Consultation process

Comments to this consultation can be sent to the EBA by clicking on the "send your comments" button on the consultation page. Please note that the deadline for the submission of comments is 26 October 2021.

A public hearing will take place via conference call on 29 September 2021 from 10:00 to 12:00 CEST.

Legal basis and background

Article 394(2) of the CRR, as amended by Regulation (EU) 2019/876, “institutions shall report the following information to their competent authorities in relation to their 10 largest exposures to institutions on a consolidated basis, as well as their 10 largest exposures to shadow banking entities which carry out banking activities outside the regulated framework on a consolidated basis, including large exposures exempted from the application of Article 395(1) […]”

Article 394(4) of the CRR mandates the EBA “to develop draft regulatory technical standards to specify the criteria for the identification of shadow banking entities referred to in paragraph 2. In developing those draft regulatory technical standards, EBA shall take into account international developments and internationally agreed standards on shadow banking and shall consider whether (a) the relation with an individual entity or a group of entities may carry risks to the institution's solvency or liquidity position; (b) entities that are subject to solvency or liquidity requirements similar to those imposed by this Regulation and Directive 2013/36/EU should be entirely or partially excluded from the obligation to be reported referred to in paragraph 2 on shadow banking entities.”

While developing the draft RTS, the EBA has relied as far as possible on the guidelines on limits on exposures to shadow banking (EBA/GL/2015/20), yet having due regard to international developments in shadow banking and taking into account the lack of third-country equivalence for institutions in certain jurisdictions.