# EUR-Lex - 52012DC0102 - EN

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# 52012DC0102

**GREEN PAPER SHADOW BANKING /* COM/2012/0102 final */**

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1.           Introduction

The 2008 crisis was global and financial
services were at its heart, revealing inadequacies including regulatory gaps,
ineffective supervision, opaque markets and overly-complex products. The
response has been international and coordinated through the G20 and the
Financial Stability Board (FSB).

The European Union has shown global leadership
in implementing its G20 commitments. In line with EU's Roadmap for Financial
Reform, the Union is very advanced in implementing the reforms linked to the
G20 commitments. Most of the reforms are now going through the legislative
process. In particular, a major achievement has been the recent adoption by the
Council and the Parliament of landmark legislation on over-the-counter
derivatives. Negotiations are also well developed on measures to revamp capital
requirements for the banking sector. Overall, the reforms will equip the EU
with the tools designed to ensure that the financial system, its institutions
and markets are properly supervised. More stable and responsible financial
markets are a pre-condition for growth and for the creation of a business
environment that allows companies to thrive, innovate and expand their
activities. This in turn enhances the confidence and trust of citizens.

However, there is an increasing area of non-bank
credit activity, or shadow banking, which has not been the prime focus of
prudential regulation and supervision. Shadow banking performs important
functions in the financial system. For example, it creates additional sources
of funding and offers investors alternatives to bank deposits. But it can also
pose potential threats to long-term financial stability.

In response to the invitations by G20 in Seoul in 2010 and in Cannes in 2011, the FSB is therefore in the process of developing
recommendations on the oversight and regulation of this activity.

The FSB's work has highlighted that the
disorderly failure of shadow bank entities can carry systemic risk, both
directly and through their interconnectedness with the regular banking system.
The FSB has also suggested that as long as such activities and entities remain
subject to a lower level of regulation and supervision than the rest of the
financial sector, reinforced banking regulation could drive a substantial part
of banking activities beyond the boundaries of traditional banking and towards
shadow banking.

Against this background, the Commission
considers it a priority to examine in detail the issues posed by shadow banking
activities and entities. The objective is actively to respond and further
contribute to the global debate; continue to increase the resilience of the Union’s financial system; and, ensure all financial activities are contributing to the
economic growth. The purpose of this Green Paper is therefore to take stock of
current development, and to present on-going reflections on the subject to
allow for a wide-ranging consultation of stakeholders.

2.           The international context

At the November 2010
Seoul Summit, the G20 Leaders identified some remaining issues of financial
sector regulation that warranted attention. They highlighted “strengthening
regulation and supervision of shadow banking” as one of these issues and
requested that the FSB, in collaboration with other international standard
setting bodies, develop recommendations to strengthen the oversight and
regulation of the “shadow banking system”.

In response, the FSB released a report on 27
October 2011[1]
on strengthening oversight and regulation of shadow banking.

Building on this report
and on the invitation of the November 2011 G20 Cannes Summit to develop its
work further, the FSB has also initiated five work-streams tasked with
analysing the issues in more detail and developing effective policy
recommendations. These work-streams include: (i) the Basel Committee on Banking
Supervision (BCBS) will work on how to further regulate the interaction between
banks and shadow banking entities and report in July 2012; (ii) the
International Organization of Securities Commissions (IOSCO) will work on
regulation to mitigate the systemic risks (including run-type risks) of Money
Market Funds (MMFs) and report in July 2012; (iii) IOSCO, with the help of
the BCBS, will carry out an evaluation of existing securitisation requirements
and make further policy recommendations in July 2012; (iv) a FSB subgroup will
examine the regulation of other shadow banking entities[2] and report in
September 2012; and, (v) another FSB subgroup will work on securities lending
and repos and report in December 2012. These work-streams bring together the EU
and other major jurisdictions including the US, China and Japan, who are each considering appropriate regulatory measures.

3.           What is
shadow banking?

The October 2011 FSB
report represents the first comprehensive international effort to deal with
shadow banking. It focuses on (i) the definition of principles for the
monitoring and regulation of the shadow banking system; (ii) the initiation of
a mapping process to identify and assess systemic risks involved in shadow banking;
and, (iii) the identification of the scope of possible regulatory measures.

In this report, the FSB defined the shadow
banking system as "the system of credit intermediation that involves
entities and activities outside the regular banking system". This
definition implies the shadow banking system is based on two intertwined
pillars.

First, entities operating outside the regular
banking system engaged in one of the following activities:

·
accepting
funding with deposit-like characteristics;

·
performing
maturity and/or liquidity transformation;

·
undergoing
credit risk transfer; and,

·
using
direct or indirect financial leverage.

Second, activities that could act as important
sources of funding of non-bank entities. These activities include securitisation,
securities lending and repurchase transactions ("repo").

Against this background, the Commission is at
this stage focussing its analysis on the following possible shadow banking
entities and activities. This should not be viewed as exhaustive, as shadow
banking entities and activities can evolve very rapidly.

Possible
shadow banking entities and activities on which the Commission is currently
focussing its analysis

Entities:

-   Special purpose entities which perform liquidity and/or
maturity transformation; for example, securitization vehicles such as ABCP
conduits, Special Investment Vehicles (SIV) and other Special Purpose Vehicles
(SPV);

-   Money Market Funds (MMFs) and other types of investment
funds or products with deposit-like characteristics, which make them vulnerable
to massive redemptions ("runs");

-   Investment funds, including Exchange Traded Funds (ETFs),
that provide credit or are leveraged;

-   Finance companies and securities entities providing
credit or credit guarantees, or performing liquidity and/or maturity
transformation without being regulated like a bank; and

-   Insurance and reinsurance
undertakings which issue or guarantee credit products.

Activities:

-   Securitisation; and

-   Securities lending and repo.

The FSB has
roughly estimated the size of the global shadow banking system at around € 46
trillion in 2010, having grown from € 21 trillion in 2002. This represents
25-30% of the total financial system and half the size of bank assets. In the United States, this proportion is even more significant, with an estimated figure of
between 35% and 40%. However, according to the FSB estimates, the share of the
assets of financial intermediaries other than banks located in Europe as a percentage of the global size of shadow banking system has strongly increased
from 2005 to 2010, while the share of US located assets has decreased. On a
global scale, the share of those assets held by European jurisdictions has
increased from 10 to 13% for UK intermediaries, from 6 to 8% for NL intermediaries,
from 4% to 5% for DE intermediaries and from 2% to 3% for ES intermediaries. FR
and IT intermediaries maintained their previous shares in the global shadow
banks assets of 6% and 2% respectively.

Questions:

a)       Do
you agree with the proposed definition of shadow banking?

b)      Do you agree with the preliminary
list of shadow banking entities and activities? Should more entities and/or
activities be analysed? If so, which ones?

4.           What are
the risks and benefits related to shadow banking?

Shadow banking activities can constitute a
useful part of the financial system, since they perform one of the following
functions: (i) they provide alternatives for investors to bank deposits; (ii)
they channel resources towards specific needs more efficiently due to increased
specialization; (iii) they constitute alternative funding for the real economy,
which is particularly useful when traditional banking or market channels become
temporarily impaired; and, (iv) they constitute a possible source of risk diversification
away from the banking system.

Shadow banking entities and activities may
however also create a number of risks.  Some of these risks can be of a
systemic nature, in particular due to the complexity of shadow banking entities
and activities; their cross-jurisdictional reach and the inherent mobility of
securities and fund markets; and, the interconnectedness of shadow banking
entities and activities with the regular banking system.

These risks can be grouped together as follows:

(i)
Deposit-like funding structures may lead to "runs":

Shadow banking activities are exposed to similar
financial risks as banks, without being subject to comparable constraints
imposed by banking regulation and supervision. For example, certain shadow
banking activities are financed by short-term funding, which is prone to risks
of sudden and massive withdrawals of funds by clients.

(ii)
Build-up of high, hidden leverage:

High leverage can increase the fragility of the
financial sector and be a source of systemic risk. Shadow banking activities
can be highly leveraged with collateral funding being churned several times,
without being subject to the limits imposed by regulation and supervision.

(iii)
Circumvention of rules and regulatory arbitrage:

Shadow banking operations can be used to avoid
regulation or supervision applied to regular banks by breaking the traditional
credit intermediation process in legally independent structures dealing with
each other. This "regulatory fragmentation" creates the risk of a
regulatory "race to the bottom" for the financial system as a whole,
as banks and other financial intermediaries try to mimic shadow banking
entities or push certain operations into entities outside the scope of their
consolidation.  For example, operations circumventing capital and accounting
rules and transferring risks outside the scope of banking supervision played an
important role in the build-up to the 2007/2008 crisis.

(iv) Disorderly failures affecting the banking system:

Shadow banking
activities are often closely linked to the regular banking sector. Any failures
can lead to important contagion and spill-over effects. Under distress or
severe uncertainty conditions, risks taken by shadow banks can easily be
transmitted to the banking sector through several channels: (a) direct
borrowing from the banking system and banking contingent liabilities (credit
enhancements and liquidity lines); and, (b) massive sales of assets with
repercussions on prices of financial and real assets.

Questions:

c)       Do you agree that shadow banking
can contribute positively to the financial system?  Are there other beneficial
aspects from these activities that should be retained and promoted in the
future?

d)      Do you agree with the description
of channels through which shadow banking activities are creating new risks or
transferring them to other parts of the financial system?

e)       Should other channels be
considered through which shadow banking activities are creating new risks or
transferring them to other parts of the financial system?

5.           What are
the challenges for supervisory and regulatory authorities?

Given the potential risks set out above, it is
essential that supervisory and regulatory authorities consider how best to
address shadow banking entities and activities. However, this task presents
various challenges.

First, the authorities concerned have to
identify and monitor the relevant entities and their activities. In the EU,
most national authorities have relevant experience and the European Central
Bank (ECB), the European Banking Authority (EBA), the European Securities and
Markets Authority (ESMA), the European Insurance and Occupational Pension
Authority (EIOPA) and the European Systemic Risk Board (ESRB) have started
building up expertise on shadow banking. However, there remains a pressing need
to fill the current data gaps on the interconnectedness between banks and
non-banks financial institutions on a global basis. The EU could therefore need
to ensure  permanent processes for the collection and exchange of information
on identification and supervisory practices between all EU supervisors, the
Commission, the ECB and other central banks. This will require close
coordination among them to share information and promptly detect problems. It
may also require new specific powers for national supervisory authorities.

Secondly, the authorities have to determine the
approach to supervising shadow banking entities. The Commission considers it
should (i) be performed at the appropriate level, i.e. national and/or European;
(ii) be proportionate; (iii) take into account existing supervisory capacity
and expertise; and, (iv) be integrated with the macro-prudential framework. On
the latter, the authorities must be able to understand the hidden credit
intermediation chains; assess properly their systemic importance; consider the
macro-prudential implications of new products or activities; and, map the
interconnectedness of the shadow banking system with the rest of the financial
sector.

Thirdly, as shadow banking issues may require
extending the scope and nature of prudential regulation, appropriate regulatory
responses are needed. The afore-mentioned FSB report has suggested some general
principles which regulators should apply in designing and implementing
regulatory measures for shadow banking. The FSB suggested that regulatory
measures should be targeted, proportionate, forward-looking and adaptable,
effective, and should be subject to assessment and review. The Commission
considers that the authorities should take into account these high-level
principles. The Commission also considers that a specific approach to each kind
of entity and/or activity must be adopted. This will require achieving the
right balance between three possible and complementary means: (i) indirect
regulation (regulating the links between the banking system and shadow banking
entities); (ii) appropriate extension or revision of existing regulation; and,
(iii) new regulation specifically directed at shadow banking entities and
activities. In this context, alternative or complementary non-regulatory
measures also need to be considered.

Questions:

f)       Do you agree with the need for
stricter monitoring and regulation of shadow banking entities and activities?

g)       Do you agree with the
suggestions regarding identification and monitoring of the relevant entities
and their activities? Do you think that the EU needs permanent processes for
the collection and exchange of information on identification and supervisory
practices between all EU supervisors, the Commission, the ECB and other central
banks?

h)       Do you agree with the general
principles for the supervision of shadow banking set out above?

i)        Do you agree with the general
principles for regulatory responses set out above?

j)       What measures could be envisaged
to ensure international consistency in the treatment of shadow banking and
avoid global regulatory arbitrage?

6.           What
regulatory measures apply to shadow banking in the EU?

In the EU, each of the three possible regulatory
approaches outlined in the previous section of this Green Paper is currently
being followed and is summarised below. A number of legislative proposals with
implications for shadow banking entities and activities are already in place or
currently being negotiated by the European Parliament and the Council. Some
Member States also have additional national rules for the oversight of
financial entities and activities that are not regulated at EU level.

6.1.        Indirect regulation of shadow banking activities
through banking and insurance regulation

The EU has taken important steps indirectly to
address shadow banking issues raised by securitisation structures to deter
banks to circumvent existing capital requirements and other legislation:

·
the
revision of the EU banking capital requirements directive in 2009 (the
so-called Capital Requirements Directive, or "CRD II"),[3]
which Member States should have transposed into national law by October 2010,
required both originators and sponsors of securitized assets to retain a
substantial share of their underwritten risks. The directive also reinforced
the
treatment of liquidity lines and credit exposure to securitization vehicles.
The previous rules had allowed banks to avoid posting capital for the
corresponding risks;

·
the
amendments
in the subsequent revision of the directive in 2010 (the so-called
"CRD III")[4] further
strengthened capital requirements in line with the recommendations published by
the BCBS in July 2009. Since December 2011, banks have been required to comply
with additional disclosure rules and hold significantly more capital to cover
their risks when investing in complex re-securitisations. This Directive also
required competent authorities in all Member States, when carrying out their
risk assessment of individual banks under Pillar 2 of the Basel/CRD framework,
to take into account reputational risks arising from complex securitisation
structures or products;[5]

·
in
its proposal for the latest revision to the directive (the so-called "CRD
IV")[6]
the Commission has proposed the introduction of explicit liquidity requirements
as of 2015, including liquidity facilities for SPVs and for any other products
or services linked to a bank's reputational risk; and

·
the
Commission endorsed in November 2011 an amendment to the International
Financial Reporting Standards (IFRS) to improve the disclosure requirements
relating to the transfer of financial assets (related to IFRS 7).[7]
The Commission is also analysing the new standards on consolidation (related to
IFRS 10, 11 and 12). The objective of these standards is to improve the
consolidation of securitization vehicles and the disclosure requirements
relating to unconsolidated participations in "structured entities"
like securitisation vehicles or asset-backed financing.

With regard to the
insurance sector, under the rules implementing the Solvency II Framework
Directive[8]
(Solvency II) for insurance and reinsurance undertakings investing in
securitisation products, the Commission plans to require originators and
sponsors of such products to meet risk retention requirements similar to those
set out in banking legislation.

6.2.      Enlarging
the scope of current prudential regulation to shadow banking activities

The scope of existing regulations has also been
extended to new entities and activities so as to have a broader coverage,
address systemic risk concerns and make future regulatory arbitrage more
difficult.

This is the approach taken as regards investment
firms. They are subject to the regime set out in the Markets in Financial
Instruments Directive (MiFID).[9]
In the review of this framework, the Commission proposed on 20 October 2011 a
recast directive and a regulation in order to broaden the scope of the
framework (e.g. to cover all high frequency traders and more commodity
investment firms will be brought within the scope of MiFID); increase the
transparency of non-equity instruments – which will enhance the ability to
identify risks from shadow banking; and, entrust competent national authorities
and ESMA with enhanced and proactive intervention powers, enabling them to
control and mitigate risks from shadow banking. MiFID does not directly impose
capital requirements for those firms brought within its scope. However, it
cross-refers to the Capital Requirements Directive, thereby imposing bank-like
prudential regulation on entities performing shadow banking activities.

6.3.        Direct regulation of some shadow banking
activities

Finally, the EU has also
already adopted measures to regulate shadow banking entities and activities
directly.

As far as investment funds are concerned, the
Alternative Investment Fund Managers Directive (AIFMD)[10]
already addresses a number of shadow banking issues, provided that the entities
concerned are captured as alternative investment funds under that directive.
Asset managers are now required to monitor liquidity risks and employ a
liquidity management system. Given new methods for calculating the leverage and
reporting requirements, activities such as repurchase agreements or securities
lending will be easier for the competent authorities to monitor.

As regards MMFs and ETFs, these funds may be
covered by existing legislation on undertakings for collective investment in
transferable securities (UCITS).[11] In addition,
ESMA has developed guidelines which entered into force on 1 July 2011.[12]
These guidelines include recommendations for these funds to restrict the
eligible investments, limit the weighted-average maturity, and to carry out daily
net asset value calculations.

Credit Rating Agencies (CRAs) are not leveraged
and they do not directly engage in maturity transformation. Nevertheless, they
have an important role in the credit intermediation chain since they assign
ratings to products and entities. In the EU, CRAs are subject to stringent
regulation and supervision by ESMA.[13]
Moreover, the Commission has proposed additional legislative measures to
strengthen the credit rating process.[14]

Finally, in relation to insurance regulation,
Solvency II also addresses a number of shadow banking issues as it provides comprehensive
regulation centred on a risk-based and economic approach, along with strong
risk management requirements including a "prudent person" principle
for investments. In particular, it explicitly covers credit risks in capital
requirements; provides for a total balance sheet approach where all entities
and exposures are subject to group supervision; and, is as stringent in respect
of credit risk as CRD IV. Solvency II also requires Member States to
authorise the establishment of an insurance SPV. Detailed rules implementing
Solvency II which are currently being considered will include authorisation and
ongoing regulatory requirements relating to solvency, governance and reporting
as far as insurance SPVs are concerned.

Questions:

k)      What are your views on the
current measures already taken at the EU level to deal with shadow banking
issues?

7.           Outstanding
Issues

Although the indirect, extended and direct
regulatory measures set out above go a long way to addressing shadow banking
entities and activities, there is still further progress to make given the
evolving nature of the shadow banking system and out understanding of it.

In coordination with the FSB, the standards
setting bodies and the relevant EU supervisory and regulatory authorities, the
aim of the Commission's current work is to examine existing measures carefully
and to propose an appropriate approach to ensure comprehensive supervision of
the shadow banking system, coupled with an adequate regulatory framework.

In this context, there are five key areas where
the Commission is further investigating options and next steps.

7.1.        Banking Regulation

In
this area, several issues are being examined with the overarching aim to:

·
recapture
for prudential purposes any flawed risk transfer towards shadow banking entities;

·
examine
ways to identify the channels of exposures, limit excessive exposure to shadow
banking entities and improve the disclosure requirements of banks towards
exposures to such entities; and

·
ensure
that banking regulation covers all relevant activities.

In particular, consolidation rules for shadow
banking entities are being examined to ensure that bank-sponsored entities are
appropriately consolidated for prudential purposes and therefore fully subject
to the comprehensive Basel III framework. It is also appropriate to study the
differences between accounting consolidation and prudential consolidation, as
well as the differences between jurisdictions. In this regard, it is worthwhile
to assess the impact of the new IFRS on consolidation, in particular in respect
of shadow banking entities.

As regards bank exposure to shadow banking
entities, there are several issues that need to be investigated further: (i)
whether the large exposure regime in the current banking legislation is
stringent enough to properly  address all shadow banking exposures,
individually as well as globally; (ii) how to account effectively for leverage
in shadow banking entities such as investment funds, including in particular
whether to extend the so-called look-through approach currently being applied
by some banks; (iii) whether to apply the CRD II treatment of liquidity lines
and credit exposures for securitisation vehicles to all other shadow banking
entities; and, (iv) a review of the implementation of the national supervisory
treatment for implicit support.

Existing EU banking
legislation is limited to deposit-taking institutions that provide credit. It
could be considered to enlarge the scope of financial institutions and
activities covered by the current legislation. The Commission is currently
studying the merits of extending certain provisions of CRD IV to non
deposit-taking finance companies not covered by the definition in the Capital
Requirements Regulation (CRR).[15]
This would also limit the scope for future regulatory arbitrage for providers
of credits.

7.2.        Asset management regulation issues

The Commission is looking carefully at the
evolution of both the ETF and the MMF markets in the context of shadow banking.

As far as ETFs are concerned, the FSB has
identified a possible mismatch between liquidity offered to ETF investors and
less-liquid underlying assets. The current regulatory debate focuses on
possible liquidity disruptions; the quality of collateral provided in cases of
securities lending and derivatives (swap) transactions between ETF providers
and their counterparties; and, conflicts of interest where counterparties in
these transactions belong to the same corporate group. Some of these issues are
not confined to ETFs. They arise in every instance where securities owned by an
investment fund are lent to other counterparties or where a fund enters into a
derivative transaction (e.g. total return swaps) with counterparty.

In addition, ESMA is currently carrying out a
review of the UCITS framework in general and in particular as regards the
potential application to ETFs, with a view to adopting new guidelines this
year. The guidelines will include recommendations regarding the labelling of
ETFs, disclosures to investors and use of collateral.

In relation to MMFs, the main concerns
identified relate to the risks of runs (i.e. massive simultaneous redemptions
by investors). Such runs could seriously affect financial stability. The FSB
has identified the possibility of runs stemming mainly from the credit and
liquidity risks inherent to the portfolio of an MMF, as well as from the method
of valuing MMFs' assets. The risks of runs increase when MMFs value their
assets through the amortised cost approach in order to maintain a stable Net Asset
Value (NAV), even if the market values of the underlying investments fluctuate,
as is the case for the so called constant NAV MMF. Investors have an incentive
to be the first to withdraw funds from them in time of market stress before the
NAV is forced to drop.

7.3.        Securities lending and repurchase agreements

Another central issue concerns securities
lending and repurchase agreements as these activities can be used rapidly to
increase leverage and are a key source of funds used by some shadow banking
entities. The ongoing work by the Commission and the FSB is examining current
practices, identifying regulatory gaps in existing regulation and looking at
inconsistency between jurisdictions.

The specific issues to be covered could include:
prudent collateral management; reinvestment practises of cash received against
collateralised securities; re-use of collateral (re-hypothecation); ways to
improve transparency both in the markets and for supervisory authorities, and,
the role of market infrastructure. The Commission considers that special
attention should be given to global leverage resulting from securities lending,
collateral management and repos transactions in order to ensure that
supervisors have accurate information to assess this leverage, the tools to
control it and to avoid its excessive pro-cyclical effects. Finally, bankruptcy
laws and their impact on collateral should also be reviewed with a view to
increasing international consistency along with the accounting practices of
such transactions.

7.4.        Securitisation

It will be important to
include an examination of whether the measures relating to securitisation set
out earlier in this Green Paper have been effective in addressing shadow
banking concerns.

In addition, the
Commission is currently examining how similar measures can be taken in other
sectors. The main issues include transparency, standardisation, retention and
accounting requirements. The Commission services and the US Securities and
Exchange Commission have therefore started comparing securitisation rules in
the EU and in the US which share the goal of safer and sounder securitisation
practices. Joint work has also been launched within IOSCO, in coordination with
the BCBS, to help the FSB in developing policy recommendations by July 2012
aimed at requesting all jurisdictions to adopt comparable and compatible
frameworks.

7.5.        Other shadow banking entities[16]

Additional work on other shadow banking entities
is also underway within the FSB and the EU in order to: (i) list the entities
that could be covered; (ii) map the existing regulatory and supervisory regimes
in place; (iii) identify gaps in these regimes; and, (iv) suggest additional
prudential measures for these entities, where necessary.

Data collection is another issue to consider, as
some national supervisors may not have the necessary powers to collect data on
all shadow banking entities. The Commission and the European Supervisory
Authorities will consult with national supervisory authorities in order to
assess the situation. Depending on the results, a legislative approach at EU
level could be warranted. In line with the FSB's work on data gaps, it may also
be useful to ensure that supervisors have the powers to collect and share data
on a global basis. In this context, the creation of a global Legal Entity
Identifier (LEI) would be welcome.[17]

As stated in its Green
Paper of 20 October 2010,[18]
the Commission will also undertake further work on the resolution of other
financial institutions. This will examine the nature of the risks for financial
stability posed by various non-bank entities and explore the need for any
appropriate resolution arrangements. In this context, a number of the shadow
bank entities referred to in this Green Paper will be considered.

Finally, the Commission
considers that further analysis should be carried out to monitor whether the
new Solvency II Framework will be fully effective in addressing any issues
raised by insurance and reinsurance undertakings performing activities similar
to shadow banking activities.

Questions:

l)        Do
you agree with the analysis of the issues currently covered by the five key
areas where the Commission is further investigating options?

m)      Are there additional issues that
should be covered? If so, which ones?

n)       What modifications to the
current EU regulatory framework, if any, would be necessary properly to address
the risks and issues outlined above?

o)      What other measures, such as
increased monitoring or non-binding measures should be considered?

8.           What are the
next steps envisaged by the EU?

On the basis of the
outcome of this consultation and the work carried out by the ESRB, EBA, ESMA
and EIOPA, the Commission will decide on the appropriate follow-up regarding
the shadow banking issues outlined in this Green Paper, including legislative
measures, as appropriate. The Commission will continue to engage in ongoing
international work, including to ensure any level playing field concerns are
addressed. Any regulatory follow-up will be accompanied by a careful assessment
of its potential impacts and will also take into account the results of the
work of the high-level expert group on structural banking reforms recently
appointed by the Commission.[19]
After the publication of the group's report, the Commission will assess the
need for additional, targeted consultations on selected issues, as necessary.

The Commission invites
stakeholders to comment on all the issues set out in this Green Paper and in
particular to respond to the questions above. In addition, the Commission is
organising a public conference on shadow banking in Brussels on 27 April 2012
to which all stakeholders are invited.[20]

The responses received
will be available in the Commission website unless confidentiality is specifically
requested, and the Commission will publish a summary of the results of the consultation.

Stakeholders are invited
to send their comments before 1 June 2012 to the following email address: markt-consultation-shadow-banking@ec.europa.eu

[1] Available
at http://www.financialstabilityboard.org/publications/r_111027a.pdf

[2] Other
shadow banking entities covers the entities listed in the box below, excluding
MMFs.

[3] Directive
2009/111/EC of the European Parliament and of the Council of 16 September 2009
amending Directives 2006/48/EC, 2006/49/EC and 2007/64/EC as regards banks
affiliated to central institutions, certain own funds items, large exposures,
supervisory arrangements, and crisis management, OJ L 302, 17.11.2009, p.
97–119.

[4] Directive
2010/76/EU of the European Parliament and of the Council of 24 November 2010
amending Directives 2006/48/EC and 2006/49/EC as regards capital requirements
for the trading book and for re-securitisations, and the supervisory review of
remuneration policies, OJ L 329, 14.12.2010, p. 3–35.

[5] See
Annex V, point 8 of Directive 2006/48/EC as amended by Directive 2009/111/EC.

[6] See http://ec.europa.eu/internal_market/bank/regcapital/index_en.htm

[7] Commission Regulation (EU)
No 1205/2011 of 22 November 2011 amending Regulation (EC)
No 1126/2008 adopting certain international accounting standards in
accordance with Regulation (EC) No 1606/2002 of the European Parliament
and of the Council as regards International Financial Reporting Standard (IFRS)
7 Text with EEA relevance.

[8] Directive
2009/138/EC of the European Parliament and of the Council of 25 November 2009
on the taking-up and pursuit of the business of Insurance and Reinsurance, OJ
L335/1 of 17.12.2009.

[9]  Directive
2004/39/EC of the European Parliament and of the Council of 21 April 2004 on
markets in financial instruments,  OJ L 145, 30.4.2004, p. 1–44.

[10] Directive
2011/61/EC of the European Parliament and of the Council of 8 June 2011 on
Alternative Investment Fund Managers and amending Directives 2003/41/EC and
2009/65/EC and Regulations (EC) No 1060/2009 and (EU) No 1095/2010, OJ L 174, 1.7.2011, p.1.

[11]  Directive
2009/65/EC of the
European Parliament and of the Council of 13 July 2009 on the coordination of
laws, regulations and administrative provisions relating to undertakings for
collective investment in transferable securities,

[12] Available
at http://www.esma.europa.eu/content/Guidelines-Common-definition-European-money-market-funds

[13] Regulation
(EC) No 1060/2009 of the European Parliament and of the Council of 16 September
2009 on credit rating agencies, OJ L 302, 17.11.2009, p. 1–31, and Regulation
(EU) No 513/2011 of the European Parliament and of the Council of 11 May 2011
amending Regulation (EC) No 1060/2009 on credit rating agencies, OJ L 145,
31.5.2011, p. 30–56.

[14] Proposal
for a Regulation of the European Parliament and of the Council amending
Regulation (EC) No 1060/2009 on credit rating agencies, COM(2011) 747 final of
15.11.2011.

[15] European
Commission, Proposal for a Regulation of the European Parliament and of the
Council on prudential requirements for credit institutions and investment
firms, COM(2011) 452 final of 20 July 2011.

[16] For a
list of other shadow banking entities, see foot note 2.

[17] The
LEI is a global standard that would help risk management, data quality and
macro prudential supervision. The FSB has set up an Expert Group to coordinate
work among the global regulatory community to prepare recommendations for the
appropriate governance framework for a global LEI.

[18] Available
at  http://ec.europa.eu/internal_market/bank/docs/crisis-management/framework/com2010_579_en.pdf

[19] http://ec.europa.eu/commission_2010-2014/barnier/headlines/news/2012/01/20120116_en.htm

[20] http://ec.europa.eu/internal_market/bank/shadow_banking/index_en.htm