what is the european banking authority eba 
the european banking authority eba is a regulatory body that strives to maintain financial stability throughout the european union s eu banking industry it was established in 2010 by the european parliament replacing the committee of european banking supervisors cebs the basics of the european banking authority eba the eba is tasked with developing regulatory technical standards and rules for financial firms in the eu internal market it oversees lending institutions investment firms and credit institutions the rules it imposes are designed to achieve the following objectives the european central bank ecb ensures that banks follow the rules set forth by the eba which runs annual transparency exercises and stress tests on more than 100 eu banks this involves cultivating fiscal data on a bank s capital risk weighted assets rwa recorded profits and losses market risk and credit risk the stress tests that the eba imposes on financial institutions seek to determine whether each institution would remain solvent in the wake of financial crises real world example the european banking authority eba the 2016 stress test carried out on 51 banks from 15 eu and european economic area eea countries revealed that only banca monte dei paschi di siena mps in italy lacked the adequate capital reserves needed to weather a three year economic shock after these results mps jettisoned many of its non performing loans from its balance sheet in a strategic effort to boost its capital levels to the required threshold the eba s powers are far reaching in that it may overrule national regulators that fall derelict in regulating their banks themselves background on the ebathe ecb supervises banks to ensure that they follow the rules set by the eba which emerged as part of the european supervisory authority esa which also consists of the european insurance and occupational pensions authority eiopa the eiopa is responsible for protecting insurance policyholders pension members and beneficiaries the effectiveness of bank operationsthe 2008 financial crisis and the european sovereign debt crisis have illuminated general shortcomings in eu banking operations after the collapse of the u s mortgage bubble and greece s revelation that its deficits were vastly larger than previously thought eurozone states like portugal ireland spain and greece itself faced soaring debt servicing costs these nations consequently sought bailouts from international institutions fiscal austerity measures designed to help countries exit bailout programs have slowed european economic growth at the same time the introduction of negative interest rates by the ecb and other central banks has squeezed banks margins these factors combined with increased regulation and poor management have caused worries about european banking sustainability for example in january 2018 italian banks were struggling under the weight of 360 billion 410 billion worth of non performing loans representing about 25 of the country s gdp as it stands currently italy s debt to gdp ratio still remains worrisome and the outlook remains uncertain 