ESMA has published its response to the Commission’s consultation on shadow banking. It broadly agrees with many of the views and opinions the Commission expresses in the consultation. It stresses two main points:
- although shadow banking entails risks, this does not mean it is detrimental, but that it should have suitable regulation and supervision; and
- it is important to avoid regulatory arbitrage and to apply flexible regulation both within Europe and internationally.
ESMA includes detail of its recent work on UCITS ETFs and MMFs to back up its views. (Source: ESMA Responds on Shadow Banking)