European Banking Authority (EBA)
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)