European Banking Authority (EBA)

A regulatory agency of the European Union and oversees the financial integrity, stability, and security of the European banking system

What is the European Banking Authority (EBA)?

The European Banking Authority (EBA) is an agency that aims to supervise financial integrity and ensure financial stability across the European Union (EU).

 

European Banking Authority (EBA)

 

The EBA is a part of the European System of Financial Supervision (ESFS), which works to ensure that the European single market functions efficiently through a regulatory framework that can be applied to all EU members.

 

Summary

  • The European Banking Authority (EBA) is a regulatory agency of the European Union and oversees the financial integrity, stability, and security of the European banking system.
  • The EBA’s responsibilities include monitoring the health of banks, resolving disagreements, developing a framework for resolution, and taking action in emergencies.
  • It is composed of four main bodies, and the highest decision-making power rests on the Board of Supervisors.

 

Brief History of the European Banking Authority

The European Banking Authority was established on January 01, 2011, as part of the ESFS. Since then, the EBA’s been overseeing financial supervision and stability in the EU. The EBA took over the responsibilities of the Committee of European Banking Supervisors, which ceased to operate after the inception of the EBA.

 

Functions of the European Banking Authority

The European Banking Authority serves the EU’s financial system in several ways.

 

1. The single rulebook

The single rulebook refers is a set of rules that underpin a single market in banking across the EU. The EBA develops technical standards and also previously created a Q&A tool to answer stakeholders’ practical questions about legislations.

 

2. A common approach to banking supervision

The EBA is responsible for creating a common banking supervision culture across the EU. To achieve a consistent supervisory culture, the EBA develops regulatory standards and supervisory methodologies that can be used for evaluation and supervision.

 

3. Monitoring the health of EU banks

The EBA is responsible for monitoring the potential risks and vulnerabilities in the EU banking system. It uses the EU-wide stress test – a risk assessment tool that tests the resilience of financial institutions – to evaluate the condition of the banking sector.

 

4. Disclosing information to investors globally

The EBA creates a disclosure framework that all EU banks must adhere to while issuing and reporting information. It allows the information to be publicly accessible and makes the market more transparent and reliable.

 

5. Consumer protection, financial innovation, and payments

The EBA protects EU’s banking consumers by identifying risks in their transactions with financial companies. It also monitors financial innovation to assess the potential risks that may arise in the future.

 

6. Action in emergency situations

The EBA plays an important role in situations that jeopardize the financial system and stability of the EU. It is responsible for the coordination of EU supervisory authorities.

 

7. Dispute mediation

The EBA assists agreements during disputes between EU authorities that operate in more than one member state. It is authorized to make mandatory decisions that require specific actions to be taken.

 

8. Developing a harmonized resolution framework

The EBA contributes to developing a framework for dealing with a failing bank or investment firm. The EU strategy for resolution foresees the training and technical assistance for authorities and monitoring of how rules are being applied.

 

Structure of the European Banking Authority

The European Banking Authority is composed of three governing bodies:

 

EBA Governing Bodies

 

1. Board of Supervisors (BoS)

The Board of Supervisors is the primary decision-making body of the EBA. The board makes all policy decisions and is responsible for deciding the EBA’s final budget each year. The Board of Supervisors is made up of the EBA’s chairperson and representatives from the 27 member states.

 

2. Resolution Committee (ResCom)

The Resolution Committee focuses on making decisions related to the resolution of matters in disputes or disagreements. The Board of Supervisors delegates the matters that the Resolution Committee deals with. The committee comprises a chairperson and resolution authorities from all member states.

 

3. Management Board (MB)

The Management Board is responsible for the EBA’s operational matters and ensures that the EBA achieves its objectives. The MB is composed of the EBA’s chairperson and six elected members of the Board of Supervisors.

 

The EBA also oversees the Standing Committee on Anti-Money Laundering and Counter-Terrorist Financing, which coordinates measures and takes decisions to prevent misuse of the European financial system.

 

More Resources

CFI is the official provider of the Certified Banking & Credit Analyst (CBCA)™ certification program, designed to transform anyone into a world-class financial analyst.

In order to help you become a world-class financial analyst and advance your career to your fullest potential, these additional resources will be very helpful:

  • European Central Bank
  • Hong Kong Monetary Authority (HKMA)
  • Federal Reserve
  • Money Laundering

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