Non-bank groups test EU regulatory perimeter, new oversight proposed

An ECB Occasional Paper examines how 'neo-conglomerates' – large non-bank groups – increasingly provide bank-like services, often under lighter regulatory regimes than licensed banks.

These groups leverage digital unbundling, re-bundling, embedded distribution, and white-label partnerships, which obscure group-wide risks and complicate supervisory cooperation.

The paper identifies significant 'blind spots' in current EU regulatory frameworks, which are largely sector-specific.

This means certain activities remain unregulated, and prudential requirements often apply only at individual entity levels, not across the entire group.

Such gaps hinder supervisors from detecting risks, understanding interdependencies, and applying adequate safeguards.

This fosters regulatory arbitrage, potentially threatening financial stability, free competition, and consumer protection.

The study also highlights operational and governance risks from AI and data access, alongside critical data and information-sharing gaps for effective oversight.

To address these challenges, the paper proposes four key policy options.

It advocates for improved monitoring of bank-like activities, harmonising definitions, and calibrating intervention powers to enhance 'perimeter governance'.

The study also suggests enhancing transparency and supervisory reach for complex multi-partner and white-label distribution models through direct licensing and increased disclosure.

Furthermore, it calls for introducing group-wide oversight for neo-conglomerates, potentially via an EU financial holding structure for large non-bank groups, with risk-based prudential requirements and supervisory colleges.

Finally, the paper recommends improving cooperation, coordination, and information-sharing across authorities, supported by EU-level sandboxes.

These measures aim to limit regulatory arbitrage and systemic interdependencies while preserving financial innovation.