In a move concerning crypto, the European Banking Authority (EBA), in collaboration with the European Systemic Risk Board (ESRB) and the Financial Stability Board (FSB), has announced a joint initiative to investigate the interconnectedness of legacy banks with non-bank financial institutions (NBFIs).
Shining A Light On Shadow Banking
As disclosed by EBA chair José Manuel Campa in an interview with the Financial Times, this move aims to shed light on the potential risks and contagion effects that could arise between banking and non-banking financial sectors in “stress scenarios.”
The EBA’s approach marks a significant step in understanding the extent of banks’ exposure to the crypto sector, including hedge funds, crypto platforms, and private equity.
The EBA’s investigation will involve assessing the banks’ balance sheet exposures to non-banks, delving into the murky waters of the NBFIs, which Campa calls an “obscure sector” characterized by diverse and often “non-ho
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