EU Regulators to Examine Interconnection between Banks, Financial Institutions, and Crypto Firms
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The post EU Regulators to Examine Interconnection between Banks, Financial Institutions, and Crypto Firms appeared first on Coinpedia Fintech News
The move that could significantly impact the growth of the cryptocurrency industry in the European Union, EU regulators have announced plans to investigate links between banks and financial firms, which also include crypto groups. Reported by Financial Times.
Examination by EU Regulators
The European Banking Authority (EBA) Chair, Jose Manuel Campa, explained during a recent speech that regulators need to have a better understanding of the whole underlying chain in non-bank financial institutions (NBFIs) due to their impressive holdings of financial assets worth around $218 trillion.
The EBA will collaborate with the European Systemic Risk Board and Financial Stability Board to develop a better understanding of how shadow banking impacts the broader financial system.
The investigation follows warnings from Andrea Enria, the European Central Bank’s chief supervisor, about bypassing certain safeguards related to cryptocurrencies.
Similarity between Banks and NBFIs
The EBA’s investigation will focus on indirect links between banks and NBFIs, such as loans and assets held by NBFIs, that could impact banks in the event of a sharp fall in value. These connections have come under increased scrutiny due to concerns over potential contagion to banks from NBFIs’ exposure to cryptocurrencies.
The EBA’s investigation will aim to develop a better interpretation of how these connections affect the wider financial system and identify any potential risks that need to be managed.
