22 May 2024

EBA's Campa at BCBS-FSI high-level meeting for European Supervisors - Expanding the boundaries of supervision in the E

New financial institutions have acquired an increasingly important role in financial intermediation, establishing themselves as an alternative to bank financing..the pervasive use of new technologies by financial entities, the increasing digitalisation of financial services....

While today the word “revolution” seems to be quite misused in many contexts, it is undoubtful that the last decade experienced a series of impactful innovations that changed completely the financial sector’s landscape. First, new financial institutions have acquired an increasingly important role in financial intermediation, establishing themselves as an alternative to bank financing. Second, the pervasive use of new technologies by financial entities, the increasing digitalisation of financial services, the increased operational interconnection between financial entities and ICT third-party providers. Finally, the emergence of new institutions active in the issuance of the crypto assets. Therefore, as European supervisors, we are now facing multiple challenges, as new risks may appear which need to be monitored and addressed. In one of the masterpieces of the European literature of the last century, “The Leopard” by Tomasi di Lampedusa, one of the characters says, “if we want that everything remains the same, everything needs to change”. While this is often used to indicate a Machiavellian conservative attitude, promoting only shallow changes that keep the substance of matters unaltered, it also provides the hook to reflect on financial markets experiencing overarching and fast-paced changes. Of course I am not advocating a full-blown revolution of practices, let alone changes that will only scratch the surface of the problems keeping them unsolved. But if we want to keep a well-functioning financial system, able to funnel funds efficiently from savers to investors, while at the same time protecting financial stability,
KEYNOTE SPEECH AT BCBS-FSI HIGH-LEVEL MEETING FOR EUROPEAN SUPERVISORS
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we must reflect on how supervisory practices and priorities should adapt to the new reality, to ensure that they remain fit for purpose.
Before tackling each of these issues, let me make one more general point – and I am grateful to say that here in Basel at the BCBS. Those challenges are all global in their nature and - to be addressed efficiently - they need a coordinated approach. Therefore, the work carried out both by the BCBS and by the Financial Stability Board on all these three fronts has been particularly helpful, setting out global standards and best practices1.

The surge in Non-bank Financial Intermediation
Since the Great Financial Crisis, we have witnessed a substantial increase in the size of the non-bank financial sector assets. Part of this increase reflects the substantial growth in the traditional asset management activity, but more recently there has also been an expansion in lending provided by non-banks to households and firms. In the EU, the volumes of such non-bank lending remain more modest than in some other major jurisdictions, but the growth rates have been quite important.... 

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