EU Brings Light to Shadow Banking Sector

(CN) - The Council of the EU on Monday adopted regulations intended to crack down on the shadow banking sector by requiring financial institutions to report trading done outside the regulated banking sector.

First proposed by the European Commission in 2014, the transparency package aims to monitor the buildup of systemic risks in the financial system relating to securities financing transactions. It will also require financial institutions to disclose information about securities financing transactions to investors whose assets are involved.

The council believes that by requiring banks to shed light on their securities financing the institutions will be less likely to shift transactions to the less-regulated shadow banking sector - which lawmakers said amounts to nearly half of the regulated banking system.

Already passed by the European Parliament in October, the law takes effect 20 days after it is published in the EU official journal.

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