EBA warns of detrimental impact of de-risking

De-risking refers to decisions taken by financial institutions not to provide services to customers in certain risk categories. De-risking can be a legitimate risk management tool but it can also be a sign of ineffective money laundering (ML) and terrorist financing (TF) risk management, with at times severe consequences.

To assess the scale and impact of de-risking across the EU and to better understand why institutions decide to de-risk particular categories of customers instead of managing the risks associated with such relationships, the EBA reached out to relevant competent authorities across the EU, as well as to external stakeholders. The EBA’s findings suggest that de-risking has a detrimental impact on the achievement of EU’s objectives, in particular in relation to fighting financial crime effectively and promoting financial inclusion, competition and stability in the single market.

The EBA considers that its regulatory guidance on how to manage ML/TF risks, if applied correctly, should help avert unwarranted de-risking. To further complement this guidance, the EBA identified a number of steps competent authorities and the European Commission and co-legislators could take. In particular, the EBA encourages competent authorities to engage more actively with institutions that de-risk and with users of financial services that are particularly affected by de-risking, to raise mutual awareness of their respective rights and responsibilities.

The EBA also advises the European Commission to clarify, in the Payment Account Directive (PAD), the interaction between AML/CFT requirements and the right to open and use a payment account with basic features, and to take advantage of the forthcoming review of the Payment Services Directive (PSD2) to ensure more convergence in the way payment institutions access credit institutions’ payment accounts services. The EBA is committed to following-up with competent authorities on the actions they have taken to tackle unwarranted de-risking going forward.