Key messages:
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There is a growing consensus that supervision and a strengthened regulatory framework is needed to harness the shadow banking system;
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It is necessary to preserve a useful channel of financial intermediation that can provide benefits to the real economy at a time when bank financing is more constrained;
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The scope of regulation should be comprehensive and flexible enough to be adaptable to future developments;
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The room for regulatory arbitrage should be reduced and regulatory divergence in the EU eliminated;
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The focus should be on activities and entities that could pose systemic risk to the financial markets;
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Potential legislative measures should take existing legislation into account and should be proportionate; and
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Transparency and data collection need to be improved in order to strengthen the basis for further policy decisions.
Stakeholders expressed general support for the five proposed key areas where the Commission is further investigating options. However, a number of other suggestions have been provided.
Some stakeholders argued for an extension of the scope of the existing banking supervisory regime as far as appropriate.
Some stakeholders argued that Money Market Funds (MMFs) and Exchanged Traded Funds (ETFs) should not be subject to further regulation in view of the existing regulation on asset management and the ESMA guidelines, whereas others preferred these areas being subject to stricter regulation.
On securities lending and repurchase agreements respondents argued for a holistic regulation addressing directly the issue of increased leverage butexpressed also concerns regarding haircut requirements due to the potential risk of increased pro-cyclicality. Instead, the generation of "safe assets" would be critical, as some respondents stressed.
Stakeholders did not insist on regulation on securitisation given that the EU regulatory framework has already been strengthened to deal with some of the issues.
On other financial entities (e.g. financial companies or broker-dealers), which are not explicitly targeted by the Green Paper, it was strongly recommended to wait for the final outcome of the work conducted by the FSB in order to ensure a consistent international approach.
A Communication by the European Commission is planned for Q1 2013 and will provide further details regarding areas for which legal proposals might be developed and their respective timing.
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