EU Supervision at the NBFI Perimeter: Mandate and Legal Interpretation in Private Equity Funds

Hybrid event.

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Zoom URL: https://uni-frankfurt.zoom-x.de/j/64339565074?pwd=QbNDhU47twY1CzSEnLXpoQRo8vuiLI.1
Meeting ID: 643 3956 5074
Password: 222869

Abstract:

Non-bank financial intermediaries (NBFIs) have expanded sharply in the last few years, reaching €50.7 trillion at end-2024 and representing 42% of EU financial-sector assets. As a growing share of credit intermediation is channelled through private market funds, the interface between banks and NBFIs becomes a more central site of potential supervisory blind spots. Risk can propagate through opaque, multi-entity legal chains linking banks and NBFIs, making it difficult to trace and to consolidate into a coherent view across entities and sectors. But even when these structures remain outside the formal regulatory perimeter, bank–NBFI linkages can shift tail losses back onto bank balance sheets - and, in stress, onto the public safety net - creating asymmetric welfare effects. The project asks whether visibility constraints, together with supervisors’ interpretation of their mandate, systematically tilt EU prudential supervision toward gaps rather than precautionary inclusion. It advances a further hypothesis: supervisory restraint may be reinforced by an evidentiary posture that treats market practices as presumptively welfare-enhancing unless authorities can conclusively demonstrate inefficiency or imminent harm. If confirmed, the findings would qualify standard economic prescriptions centred on improved mapping and monitoring by showing that recognised risks may still fail to translate into timely action when supervisory cultures of proof and defensibility favour restraint under uncertainty. The project is presented as a starting point for a broader eco-legal agenda that can be complemented with quantitative analysis and developed into a collaborative LawFin research programme.