| Author (Corporate) | European Commission |
|---|---|
| Series Title | COM |
| Series Details | (2014) 40 final (29.01.14) |
| Publication Date | 29/01/2014 |
| Content Type | Policy-making |
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The 2008 global financial crisis revealed important regulatory gaps, ineffective supervision, opaque markets and overly-complex products in the financial system. The EU has adopted a range of measures in order to render the banking system more solid and more stable, including strengthened capital requirements, rules on improved governance and supervision and resolution regimes. The progress made on the establishment of the Banking Union is also decisive in this context. The proposal regarding structural reforms of the EU banking sector, which is presented in a package with this proposal, is the final piece of the new regulatory framework, ensuring that even the largest banks in the EU become less complex and can be effectively resolved, with minimum implications for tax payers. However, the crisis highlighted the need to improve transparency and monitoring not only in the traditional banking sector but also in areas where non-bank credit activities took place, called “shadow banking”. In practice, shadow banking entities and activities raise funding with deposit-like characteristics, perform maturity or liquidity transformation, allow credit risk transfer or use direct or indirect leverage. At the end of 2012 global shadow banking assets accounted for €53 trillion, representing about half the size of the regulated banking system and mainly concentrated in Europe (around €23 trillion) and in the United States (around €19.3 trillion). Actions regarding these matters have been international and coordinated through the G20 and the Financial Stability Board (FSB) which initiated a comprehensive work on the identification of key risks of the shadow banking system. The overarching aim, as reaffirmed on several occasions by the G20, is to eliminate the dark corners in the financial sector that have a potential impact on systemic risk or merely result from regulatory arbitrage and extend regulation and oversight to all systemically important financial institutions, instruments and markets. In this context, in August 2013, the FSB adopted a policy framework consisting of eleven Recommendations addressing shadow banking risks in securities lending and repos. These Recommendations were subsequently endorsed in September 2013 by the G20 Leaders. The framework covers transparency of securities lending and repo transactions from financial institutions towards authorities as well as between fund managers and end investors, minimum standards for cash collateral reinvestment, rehypothecation of client assets, minimum regulatory standards for collateral valuation and management and evaluation of the introduction of CCPs in inter-dealer repo markets. This Regulation focuses on improving the transparency of securities lending and repo transactions. Transparency is important in order to ensure that authorities and all market actors concerned get an appropriate understanding of how the markets work and the magnitude and nature of any potential risks. In this context, transparency is a fundamental issue since it provides the information necessary to develop effective and efficient policy tools to prevent systemic risks. |
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| Source Link | http://eur-lex.europa.eu/legal-content/EN/TXT/?uri=COM:2014:040:FIN |
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| Subject Categories | Business and Industry |
| Countries / Regions | Europe |
