Contents
THE EUROPEAN COMMISSION,Having regard to the Treaty on the Functioning of the European Union,Having regard to Regulation (EU) No 575/2013 of the European Parliament and of the Council of 26 June 2013 on prudential requirements for credit institutions and amending Regulation (EU) No 648/2012note, and in particular Article 394(4), fourth subparagraph, thereof,Whereas:
(1)Shadow banking can lead to increased risks for financial stability. Authorisation and supervision in accordance with Union law mitigates that risk. It is, therefore, appropriate to lay down that entities that are subject to such authorisation and supervision are not to be considered shadow banking entities. For that purpose, it is necessary to specify that Union law.
(2)During the recent Covid-19 crisis, money market funds faced severe liquidity issues. This highlighted that risks associated with money market funds, particularly in stressed market conditions, are not fully mitigated by the existing prudential requirements in the Union and hence, can lead to an increased risk for financial stability. For that reason, exposures to money market funds should be regarded as exposures to shadow banking entities.
(3)Alternative investment funds employing leverage on a substantial basis entail additional risks that are not deemed to be adequately mitigated from a prudential perspective by the requirements imposed to their asset managers under Directive 2011/61/EU of the European Parliament and of the Councilnote. It is therefore necessary to ensure that institutions regard alternative investment funds as shadow banking entities where those undertakings employ leverage on a substantial basis, originate loans in the ordinary course of their business, or purchase third-party lending exposures for their own account.
(4)Institutions should not consider as shadow banking entities financial institutions that are treated as institutions for the calculation of risk-weighted assets under the standardised approach set out in Article 119(5) of Regulation (EU) No 575/2013, as those financial institutions are authorised and supervised by the competent authorities and subject to prudential requirements comparable, in terms of robustness, to those applied to institutions.
(5)Due to their public or semi-public nature or their cooperative status, certain entities are explicitly excluded from the scope of Directive 2013/36/EU of the European Parliament and of the Councilnote, Regulation (EU) No 648/2012 of the European Parliament and of the Councilnote and Regulation (EU) No 575/2013. For that reason, institutions should not regard those entities as shadow banking entities.
(6)Article 4 of Directive 2009/138/EC of the European Parliament and of the Councilnote excludes certain insurance and re-insurance undertakings from the scope of that Directive, due to their size. Since those undertakings are small, they do not pose significant risk to financial stability. For that reason, institutions should not regard those undertakings as shadow banking entities.
(7)Credit intermediation activities of entities that are part of a non-financial group, carried out on behalf of other entities within that non-financial group, are limited in scope. For that reason, they do not pose significant risk to financial stability and should therefore neither be identified as shadow banking entities.
(8)Entities that are included in the supervision on a consolidated basis of institutions that are subject to the prudential requirements laid down in Regulation (EU) No 575/2013 should not be identified as shadow banking entities, as risks of those entities are captured at consolidated level.
(9)The Basel Core Principles for effective banking supervision represent internationally agreed principles and a sound foundation for the regulation, supervision, governance, and risk management of a country’s banking sector. A third country institution that has been authorised and is supervised by a supervisory authority that applies those Basel Core Principles should therefore not pose a significant risk to financial stability and should not be identified as a shadow banking entity.
(10)For the same reason, subsidiaries of a parent undertaking that is authorised and supervised in accordance with the Basel Core Principles and that are included in the prudential consolidation and supervision on a consolidated basis of that parent undertaking should not be considered as shadow banking entities.
(11)Points 1, 2, 3, 6, 7, 8 and 10 of Annex I to Directive 2013/36/EU lists certain services and activities as banking services and activities. However, there are other services and activities carried out by certain entities that are very similar to those banking services and activities, where they involve maturity transformation, liquidity transformation, leverage, or credit risk transfer. Those services and activities should, for that reason, be regarded as banking services and activities for the identification of shadow banking entities.
(12)This Regulation is based on the draft regulatory technical standards submitted to the Commission by European Banking Authority.
(13)The European Banking Authority has conducted open public consultations on the draft regulatory technical standards on which this Regulation is based, analysed the potential related costs and benefits and requested the advice of the Banking Stakeholder Group established in accordance with Article 37 of Regulation (EU) No 1093/2010 of the European Parliament and of the Councilnote,
HAS ADOPTED THIS REGULATION:
Article 1Criteria for identifying shadow banking entities#
1.Institutions shall identify as a shadow banking entity:
(a)any entity that offers banking services or performs banking activities as set out in Article 2 and is not authorised and supervised in accordance with any of the Union acts listed in the Annex to this Regulation;
(b)any undertaking for collective investment in transferable securities as defined in Article 1(2) of Directive 2009/65/EC of the European Parliament and of the Councilnote where those undertakings are authorised as money market funds as referred to in Article 4 of Regulation (EU) 2017/1131 of the European Parliament and of the Councilnote;
(c)any alternative investment fund as defined in Article 4(1), point (a), of Directive 2011/61/EU, where any of the following applies:
(i)the alternative investment fund is authorised as a money market fund as referred to in Article 4 of Regulation (EU) 2017/1131;
(ii)the alternative investment fund employs leverage on a substantial basis as set out in Article 111(1) of Commission Delegated Regulation (EU) No 231/2013note;
(iii)the alternative investment fund is not prohibited from originating loans in the ordinary course of its business or from purchasing third-party lending exposures for its own account on the basis of its rules or instruments of incorporation.
2.By way of derogation from paragraph 1, institutions shall not identify the following entities as shadow banking entities:
(a)financial institutions the exposures of which are treated in accordance with Article 119(5) of Regulation (EU) No 575/2013;
(b)any entity that is excluded from the scope of any of the following:
(iii)Directive 2009/138/EC;
(c)any entity that is exempted from the application of any of the following:
(iii)Directive 2009/138/EC;
(d)any entity that is part of a non-financial group whose principal activity is to carry out credit intermediation activities for its parent undertaking or its subsidiaries or other subsidiaries of its parent undertaking;
(e)any entity that is included in the supervision of an institution on a consolidated basis;
(f)any entity established in a third-country that meets any of the following criteria:
(i)the entity has been authorised and is supervised by a third-country supervisory authority in accordance with the Basel Core Principles for effective banking supervision;
(ii)the third country’s regulatory regime, in accordance with which the entity has been authorised and is supervised, has been recognised as equivalent to the one applied in the Union for such entities in accordance with the equivalence provisions of the applicable Union legal act referred to in the Annex;
(iii)the entity is included in the supervision on a consolidated basis of an institution that has been authorised and is supervised by a third-country supervisory authority that applies banking regulation and supervision based on the Basel Core Principles for effective banking supervision.
Article 2Banking services and activities#
1.For the purposes of Article 1, the following shall constitute banking services and activities:
(a)the activities referred to in points 1, 2, 3, 6, 7, 8 and 10 of Annex I to Directive 2013/36/EU;
(b)any other service or activity involving maturity transformation, liquidity transformation, leverage or credit risk transfer.
2.By way of derogation from paragraph 1, activities and services consisting of clearing as defined in Article 2, point (3), of Regulation (EU) No 648/2012 shall not constitute banking services and activities.
Article 3Entry into force#
This Regulation shall enter into force on the twentieth day following that of its publication in the Official Journal of the European Union.
Union legislation referred to in Article 1(1), point (a) and Article 1(2), point (f)(ii)
1.Regulation (EU) No 575/2013 of the European Parliament and of the Councilnote
10.Directive 2009/138/EC of the European Parliament and of the Councilnote
11.Directive (EU) 2016/2341 of the European Parliament and of the Councilnote
12.Directive 2014/59/EU of the European Parliament and of the Councilnote
13.Directive 2009/65/EC of the European Parliament and of the Councilnote
14.Directive 2011/61/EU of the European Parliament and of the Councilnote
15.Regulation (EU) 2015/760 of the European Parliament and of the Councilnote
16.Regulation (EU) No 346/2013 of the European Parliament and of the Councilnote
17.Regulation (EU) No 345/2013 of the European Parliament and of the Councilnote
2.Directive 2013/36/EU of the European Parliament and of the Councilnote
3.Regulation (EU) 2019/2033 of the European Parliament and of the Councilnote
4.Directive (EU) 2019/2034 of the European Parliament and of the Councilnote
5.Regulation (EU) No 600/2014 of the European Parliament and of the Councilnote
6.Directive 2014/65/EU of the European Parliament and of the Councilnote
7.Regulation (EU) No 648/2012 of the European Parliament and of the Councilnote
8.Directive (EU) 2015/2366 of the European Parliament and of the Councilnote
9.Directive 2009/110/EC of the European Parliament and of the Councilnote
Source: EUR-Lex, © European Union, 1998-2026. Reuse authorised under Decision 2011/833/EU.