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  • Writer's pictureFAI Comply

The European Banking Authority’s Opinion on De-Risking

The European Bank Authority (‘EBA’) encourages authorities to engage more actively with institutions regarding de-risking.

The following key drivers of institutions’ decisions to de-risk customers were identified:

  • Money Laundering or Terrorist Financing (‘ML/TF’) risks exceed institutions’ ML/TF risk appetite and give rise to legal as well as reputational risks.

  • Lack of expertise by institutions in specific customers’ business models.

  • Cost of compliance.

The EBA notes that while the impact of de-risking on different categories of customers varies, de-risking can have a detrimental impact on the achievement of EU’s objectives, therefore the EBA considers unwarranted de-risking to be a significant issue across the EU, with a potentially significant adverse impact on the EU financial system’s integrity and stability.

De-risking occurs across all Member States and sectors and affects a great variety of customers of financial services in the EU, threatening the stability of national financial systems. Considering this the EBA advises that financial services authorities and the co-legislator ensure unwarranted de-risking is addressed.


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