European authorities are scrutinizing the ties between conventional banks and non-bank financial institutions (NBFIs) due to worries about possible widespread financial risks, as pointed out by José Manuel Campa in a recent conversation with the Financial Times.
Campa stressed the importance of gaining a more profound insight into how strains within the NBFI domain, which includes sectors like cryptocurrency businesses, hedge funds, and private investment groups, might impact the wider financial framework.
Often termed “shadow banks,” NBFIs oversee around $218 trillion in assets, making up nearly half of the world’s financial assets, as per the FT article.
Campa disclosed that the EBA intends to work closely with the European Systemic Risk Board and Financial Stability Board to gauge the possible effects of a decline in the shadow banking industry on general financial stability.
José Manuel Campa, the head of the European Banking Authority (EBA), stated that the EBA had been evaluating the banks’ balance sheet risks associated with non-banks, such as loans.
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