The European Banking Authority publishes a report on the non-bank lending sector | Shearman & Sterling LLP

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The European Banking Authority has published a report on the EU non-bank lending sector, i.e. the growing number of financial intermediaries operating outside the EU financial services regulatory perimeter, including BigTech companies (e.g. Meta , Amazon and Google) and FinTech companies, which develop innovative technologies for financial services. services.

The report responds to the European Commission’s 2021 report call for advice on digital finance, which called for contributions to advance EU digital finance strategy. The European Supervisory Authorities (EBA, European Securities and Markets Authority and European Insurance and Occupational Pensions Authority) have published a digital finance report in response to the Commission’s call for advice in January 2022. However, the call for advice had also requested a specific analysis from the EBA on the non-bank lending sector and whether there was a need to adjust the scope regulatory to resolve any issues arising from the growth of the sector.

The EBA report examines the potential risks associated with the non-bank lending sector and makes recommendations on the regulatory approach in the following areas:

  • Prudential aspects and supervision: the EBA supports the possible harmonization of authorization and supervision requirements under the EU Consumer Credit Directive and the Mortgage Credit Directive and changes to the scope of consolidation rules under the EU Capital Requirements Regulation;
  • Consumer protection and business conduct rules: the EBA supports proposals to broaden the scope of the CCD to include a wider range of products (e.g. low value loans and buy now and pay later) and credit providers (e.g. potential crowdfunding service providers), as well as improving disclosure, advertising and out-of-court complaint handling for loan agreements that do not fall within the traditional banking scope;
  • Money laundering/terrorist financing risks: the EBA proposes to further examine the subjection of non-bank loans to AML/CFT obligations;
  • Macroprudential risks: the EBA proposes to consider standardized reporting at EU level, which would make it possible to map risks and vulnerabilities and to develop rules at EU level for certain financial intermediation activities; and
  • Microprudential risks: the EBA proposes the examination of a harmonized European framework for non-bank loans.

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