The European Banking Authority (EBA) was formed in 2011 under the umbrella supervisory framework of the European System of Financial supervision (ESFS), 2010. The ESFS also consists of the European Systemic Risk Board (ESRB) and other supervisory authorities, namely the European Securities and Markets Authority (ESMA) and the European Insurance and Occupational Pensions Authority(EIOPA). The core responsibilities of ESFS is the exchange of information and regulation of the EU Member States, to preserve financial stability, and ensure protection to its citizens.
The Hierarchy of the EU Financial Regulatory Framework
In June 2017, the three European Supervisory Authorities (EBA, ESMA, EIOPA) published its final Guidelines on AML/CFT. The Guidelines are based on a risk-based approach to AML/CFT to be adopted by both, credit and financial institutions, and AML/CFT regulators.
The Guidelines lay down the factors credit and financial institutions should consider, when assessing the ML/TF risk associated with a business relationship or single transaction. In addition, customer due diligence measures to mitigate the ML/TF risk have been provided.
Objectives and Responsibilities of the EBA
The EBA was established on 1 January 2011, as an independent EU Authority that took over the responsibilities of the Committee of European Banking Supervisors. It works to ensure regulations and supervision across the European banking sector to maintain “financial stability and safeguard the integrity, efficiency and orderly functioning of the banking sector.”
It sets out the framework of the European Single Rulebook for harmonious functioning of the financial institutions throughout the EU. Responsibilities include supervision and assessment of risks and vulnerabilities in the EU banking sector.
The EBA also sets out Guidelines regarding limits and approaches of an institutions’ exposure to ‘shadow banking entities’ that carry out bank-like activities outside a regulated framework. For this purpose, ‘shadow banking entities’ are defined as entities that carry out credit inter-mediation activities, bank-like activities involving maturity transformation, liquidity transformation, leverage, credit risk transfer or similar activities.
Further, it publishes the list of credit institutions, investment firms and insurance undertakings; that have been authorised to operate within the European Union and European Economic Area countries (EEA); according to the rules under the European Central Bank (ECB)
Functions and Roles of EBA
Who must comply with EBA regulations?
The EBA regulates and monitors the following participants of the financial system:
– Banks (EU/EEA),
– Lending institutions (EU/EEA),
– Credit institutions (EU/EEA),
– Investment firms (EU/EEA),
– Insurance undertakings (EU/EEA),
– eCommerce Merchants (In complying with regulations such as Strong Customer Authentication (SCA) under PSD2
– Global systemically important institutions (G-SIIs) with an overall exposure measure of more than EUR 200 billion,
– Other systemically important institutions (O-SIIs), that due to their systemic importance, are likely to create risks, to financial stability and may affect the system negatively or contribute to market distortions.
Recent updates – The EBA 218 Work Programme
The EBA Work Programme describes and summarises the year-wise goals, priorities and deliverables.
The EBA’s work for 2018 considers seven strategic areas and 38 activities, with details of objectives to be achieved for 2018.
The Priorities for 2018 include:
– contributing to the framework of Basel Committee on Banking Supervision (BCBS);
– implementing the data infrastructure project to enhance EBA’s role as a data hub for EU banks;
– evaluating the Fintech regulatory framework, operational risks and opportunities; its impacts on the business models of credit institutions, the conduct of financial firms and AML/CFT;
– monitoring the Single Rulebook and its impact on institutions
