With the rise of FinTech over the past few years, came the provision of new financial services, especially from non-banking institutions like BigTechs, which have already developed and successfully rolled out business models for lending. Although this trend may increase competition in the market and bring benefits for clients, it should also be aligned with the EU legislation, which is currently not fit for purpose. Hence the need for new policy options.
In its report, EBA highlighted the risks related to the provision of non-bank lending and proposed a series of measures to address them. EBA therefore reminded the importance of:
– Adapting the consumer protection framework, following the entry of new players in the market, by i) enhancing the disclosure requirements and ensure that they are fair, effective and well-suited for new forms of lending, ii) strengthening the requirements for creditworthiness assessment, to ensure it is conducted in the interest of consumers;
– Clearly identifying the prudential perimeter and supervisory responsibilities in cross-border provision of services, for a more effective oversight;
– Covering all non-bank lenders in a more comprehensive way in the EU-wide AML/CTF framework, for a greater harmonization;
– Enhancing monitoring and reporting frameworks to avoid any sudden increase of macroprudential risks.
Further details here.