The current environment of swiftly rising interest rates, combined with tighter financial conditions, greater market volatility and slowing global growth “could test many of the long-standing and growing vulnerabilities in the global financial system,” the Financial Stability Board said.
The nonbank financial intermediation sector grew less than banking in 2020, according to Financial Stability Board report.
The Financial Stability Board this week provided an update on its efforts to enhance the resilience of the nonbank financial intermediation, or shadow banking, sector.
As the Financial Stability Board looks to refresh its work plan after COVID-19, FSB Chairman Randal Quarles today said it would continue to focus on non-bank financial intermediation, along with other emerging issues that pose threats to financial stability, including climate-related financial risk, crypto assets and stablecoins.
In remarks at an industry event today, Acting Comptroller of the Currency Michael Hsu called for coordination between regulatory agencies to address the significant changes that are taking place in the banking industry, particularly those related technology, payments and the rise of cryptocurrencies and decentralized finance.
Following significant liquidity strains—particularly among money market mutual funds—at the outset of the COVID-19 pandemic last March, the Financial Stability Board will publish a report in July outlining “consequential policy proposals” to improve MMF resilience.
Bank-like activity by nonbanks that poses financial stability risks grew by 11.1% to total $57.1 trillion in 2019, according to the Basel, Switzerland-based Financial Stability Board today—a return to the decade-long trend line of growth after a slower rate of increase in 2018.
The turmoil observed in global financial markets earlier this spring during the COVID-19 pandemic highlighted the need to “strengthen the resilience in the [nonbank financial intermediation] sector,” according to a new report from the Financial Stability Board today.
The rapid growth is attributable largely to nonbanks. Should this group of loans start underperforming, the risk to the banking sector is relatively low.
Prominent on the Financial Stability Board’s 2019 agenda are the role of big technology firms in financial services and the growth of shadow banking, Federal Reserve Vice Chairman for Supervision Randal Quarles said in a speech in Germany today.