EU executive cautious on shadow banking controls

The European Union’s executive has ruled out hasty curbs on “shadow banking”, or simplistic trading restrictions on mainstream lenders, in case it ends up crimping finance for the economy. Testimony to Britain’s parliament from Patrick Pearson, a senior official at the bloc’s European Commission, signaled the latest softening in tone among regulators, fearful of unintended consequences of new rules for the flow of credit to companies. Regulators worry that as mainstream lenders are more tightly regulated, risky activities will shift to the shadow banking sector. The European Commission has the sole right to propose EU laws and had aired possible curbs, but Pearson downplayed any imminent proposals to ban or restrict shadow banking activities.

    

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