EIOPA feedback to EU COM Consultation Paper on “Assessing the adequacy of macroprudential policies for Non-Bank Financial Intermediation (NBFI)

On 22 May 2024, the European Commission launched  a targeted consultation on Assessing the adequacy of macroprudential policies for Non-Bank Financial Intermediation (NBFI) and on 22 November 2024, following endorsement by the EIOPA Board of Supervisors, EIOPA submitted its feedback.

In its response to the targeted consultation, EIOPA focused on providing feedback to insurance/pensions-related questions, plus a set of other more general questions which have been deemed as indirectly related to insurance and pensions; a total of 13 questions has been answered by EIOPA (3 insurance/pensions-related questions, plus 10 questions indirectly related to insurance and pensions).

On a general note, it should be highlighted that Non-Bank Financial Intermediation (NBFI) covers very diverse sectors, including asset management companies and investment funds, non-bank investment firms, family offices, supply chain finance companies, pension funds, insurance companies, and other non-bank financial entities. Activities undertaken by NBFI entities can also overlap and might, therefore, increase interconnectedness among financial sectors. Overall, NBFIs play a pivotal role in fostering financial diversity and reducing dependency on bank financing, especially in the context of the capital markets union and the development of a robust single market. Nonetheless, a rapid expansion of NBFI can also generate new challenges and risks to financial stability.

Such conditions advise for a concerted approach when it comes to macroprudential supervision. While providing its feedback to the consultation, EIOPA highlights that two important aspects need to be taken into account:

1. the heterogeneity in the sectors and business models requires generalizations and simplifications to define a common framework;
2. the different level of maturity/complexity of the Sectorial micro- and macroprudential regulation, where in place.

While acknowledging the importance of assessing the adequacy of macroprudential policies on NBFI, EIOPA highlights in its response that European insurers operate under a well-established and robust micro-prudential capital regime which includes also macroprudential measures. Solvency II includes since its inception in its Pillars quantitative and qualitative elements with macroprudential implications to address potential procyclicality effects of long-term investors such as insurers (the so called, LTG measures). Additionally, the review of the Solvency II framework adopted by the Council on 5^th of November 2024[1] further elements with macroprudential objective to the one in place.

[1] Solvency II and IRRD: Council signs off new rules for the insurance sector - Consilium