What is the European Banking Authority (EBA)?
The European Banking Authority (EBA) is the EU agency responsible for implementing standardized rules for regulating and supervising banking across the EU. As such, the EBA’s goal is to ensure that the EU single market of banking products is efficient, transparent and stable.
One of the statutory objectives of the EBA is the monitoring of financial innovation in order to promote financial stability. The EBA published in 2018 its FinTech Roadmap which sets out the EBA’s vision and future action on topics such as Anti-Money Laundering and Counter-Financing of Terrorism, Cybersecurity, the FinTech Knowledge Hub, consumer issues and the facilitation of innovation.
EBA internal structure
The EBA is comprised of two main governing bodies that perform day to day operations:
- The Board of Supervisors (BoS) is the ultimate decision-making body. It is in charge of all the EBA’s policy decisions such as adopting draft Technical Standards, Guidelines, Opinions and Reports.
- The Management Board (MB) is responsible for operational matters of the EBA and is responsible for implementing its work programme. It ensures the Authority discharges its responsibilities and carries out its tasks. In order to achieve this aim, it is responsible for the approval of the annual plans such as work programme, budget, staff policy, reports.
These governing bodies have set up additional committees that are responsible for the matters related to specific fields, such as:
- The Resolution Committee (ResCo) has delegated powers to make decisions on banking resolution matters.
- Standing Committee on Anti-Money Laundering and Countering Terrorist Financing (AMLSC) has delegated powers to make decisions on matters related to AML/CTF.
Functions of the European Banking Authority
The EBA Assists and enables the creation of a harmonized set of prudential rules for EU banking, also known as the Single Rulebook. This Single Rulebook creates a level-playing field for regulation in the banking sector. In this way, it protects firms and consumers operating within this sector. Additionally, it discloses supervisory data on all EU banks, thereby centralizing the information access. Another area of its activities includes the promotion of cooperation between national authorities regarding the supervision of banking groups with cross-border operations.
In line with this cooperation goal, it mediates disputes that involve two or more countries. It promotes a transparent, simple and fair EU market for consumers of financial products and services. Lastly, EBA ensures fair treatment and protection for all consumers by helping firms and consumers apply European Anti-Money Laundering and Combating the Financing of Terrorism (AML and CFT) laws.
AML and CFT role
Under Article 9 of the EBA Regulation 1093/2919, the EBA has established a permanent internal standing committee that deals with AML and CFT matters (AMLSC). The AMLSC aims to coordinate measures in order to prevent the financial system from being used for ML and TF purposes.
As such, it prepares risk assessments for competent authorities as a way to assess their strategies, capabilities and resources to combat ML and TF practices. Moreover, it prepares draft decisions on the breach of EU AML and CFT laws, requests investigations to competent authorities and settles disagreements when alternative resolution forms have failed.
EBA’s role in Fintech
The EBA’s role in the area of payments, electronic money, and cryptoasset activities is to ensure that payments are secure, easy to conduct, and efficient. For instance, it provides views, opinions, technical standards and guidelines on the application of the revised Payment Services Directive (PSD2), the security of internet payments, financial innovations in payments involving virtual currencies. It has published Guidelines on the Authorisation of Payment Institutions and Electronic Money Institutions. While its reports, views and opinions have no binding force, the Binding Technical Standards (BTS) that are legal acts approved and implemented by the European Commission, are legally binding on EU states.
The EBA has established a central register of institutions to protect consumers and enhance transparency. This register contains information on all the Payment Institutions and Electronic Money Institutions that have been authorised.
On the topic of cryptoassets, the EBA has published several reports and guidelines, mainly issuing warnings regarding the risk of theft and volatility of cryptoassets. In 2019, the EBA published a Report with advice for the European Commission on Cryptoassets. This report aimed to answer the question of whether rules governing e-money and payment services providers could apply to cryptoassets. It characterized crypto-activities as falling outside the banking regulatory perimeter. Moreover, it recognized that the divergence in regulatory approaches between European states was starting to present additional risks of arbitrage.
How can PSP Lab help you?
If you are a firm or individual interested in having a more thorough explanation of the EBA guidelines, PSP Lab can be of help. Our expertise covers Fintech consulting, business development, and software development. Should you have any questions regarding the EBA and its approach to regulation, please do not hesitate to contact us.