Local view for "http://purl.org/linkedpolitics/eu/plenary/2012-11-19-Speech-1-149-000"
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"en.20121119.22.1-149-000"2
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Mr President, I would like to thank in particular Mr El Khadraoui who coordinated this report, but also other Members for an important contribution to the debate and for emphasising that regulators should not forget some actors and entities commonly designated under the term ‘shadow banking sector’.
The views expressed in the Parliament report are in line with the Commission’s concerns and the objectives: firstly, to strengthen the resilience capacities of the global financial sector and, secondly, to reduce regulatory arbitrage possibilities. I am glad to share these concerns with you. Your concrete request to act reinforces our willingness to keep these issues very high on the Commission’s agenda.
What do we mean by shadow banking? Shadow banking comprises financial entities or activities which carry out credit intermediation activities outside the regulated sector. In practice, risks linked to these activities were observed in 2008, when special purpose vehicles were purchased and then securitised illiquid assets and subprime mortgages were converted into assets such as collateralised debt obligations. These assets were bought by many investors worldwide and then turned out to be worthless and illiquid. Unfortunately, we all now know the consequences of such strategies.
Why should regulators focus on the shadow banking sector? Firstly, this sector constitutes a very large amount of financial activities. The FSB has roughly estimated the size of global shadow banking at around EUR 46 trillion in 2010 having increased from EUR 21 trillion in 2002. Secondly, the sector is highly interlinked with the regulated sector and especially with banks. Potential contagion effects are high and could materialise very quickly, with an impact on the whole economy. For instance, when money market funds suffered from financial pressures, they suddenly had to stop the investments in short instruments issued by banks and non-financial corporations. As a result, there was a credit crunch in this market. Finally, at the same time that regulators are strongly strengthening potential rules for banks – CRR, CRD 4 – it would be highly undesirable to keep some actors or entities outside the supervisory oversight. I would directly generate regulatory arbitrage opportunities and give incentives for financial entities to develop risky activities in less regulated areas of shadow banking.
For all these reasons the Commission drafted a Green Paper on shadow banking to identify the appropriate measures to regulate these risks in Europe. It is key to working in a consistent way with our G20 and Financial Stability Board partners, while adjusting our work to specific European issues. The European Systemic Risk Board contribution to this debate will be very helpful for the Commission, as well as all the contributions to the Green Paper that have been received.
In early 2013, the Commission will present a roadmap on shadow banking in the EU focusing on three priorities: firstly, the strengthening of transparency and data collection and monitoring; secondly, money market funds, and, thirdly, strengthening policies in the field of repo and securities lending transactions.
I thank Parliament for its support, through this excellent report, for the Commission’s work to strengthen our financial sector, to reduce systemic risk and to reduce the scope for regulatory arbitrage. I understand your request that the Commission acts on the shadow banking sector. This is a clear signal and we will act on it in the coming months."@en1
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