Sun. Jun 26th, 2022

23 May 2022

The European Banking Authority (EBA) published today its final draft Regulatory Technical Standards (RTS) specifying the criteria to identify shadow banking entities for the purposes of reporting large exposures. The final draft RTS clarify that entities carrying out banking activities or services and which have been authorised and supervised in accordance with the EU prudential framework, shall not be considered as shadow banking entities.

For those entities established in a third country, the final draft RTS differentiate between institutions and other entities.

  • Institutions are not identified as shadow banking entities provided they are authorised 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 are not identified as shadow banking entities provided they are subject to a regulatory regime recognised as equivalent to the one applied in the Union for such entities in accordance with the equivalence provisions of the relevant Union legal act.

Undertakings included in the consolidated supervision of an institution are out of the scope of these final draft RTS. In addition, the final draft RTS clarify that central clearing counterparties (CCPs) are not identified as shadow banking entities when performing only clearing as defined in Article 2(3) of Regulation (EU) No 648/2012 (EMIR).

Legal basis

The main basis for the development of the draft RTS are the existing EBA guidelines on limits on exposures to shadow banking entities which carry out banking activities outside a regulated framework (EBA/GL/2015/20), taking into due consideration the international developments in shadow banking.

Article 394(2) of the Capital Requirements Regulation (CRR), as amended by Regulation (EU) 2019/876 (CRR2), sets out the additional reporting obligation for an institution that is required to report its 10 largest exposures to shadow banking entities which carry out banking activities outside the regulated framework on a consolidated basis.

Article 394(4) of the CRR mandates the EBA to develop draft RTS to specify the criteria for the identification of shadow banking entities referred to in paragraph 2, taking into account international developments and internationally agreed standards on shadow banking and whether entity or a group of entities may carry risks to the institution’s solvency or liquidity position. Entities are subject to solvency or liquidity requirements similar to those imposed by this Regulation and Directive 2013/36/EU (CRD) should be entirely or partially excluded from the obligation to be reported as shadow banking entities.