The Financial Stability Board (FSB) published a report that presents results of the sixth non-bank financial intermediation monitoring exercise in the Americas. The exercise assesses the size, structure, and recent trends of the non-bank financial intermediation sector in the region and has been prepared by the FSB Reginal Consultative Group for the Americas. The report also includes recommendations for improving the monitoring of this sector.
The report concludes that total financial assets in the region reached over USD 140 trillion at end-2019, with growth of 10.1% during 2019, faster than the annualized growth of 3.6% for the period between 2013 and 2018 and contrasting with the negligible annual contraction of 0.2% registered during 2018. The growth in total assets in 2019 was largely driven by the largest jurisdiction (United States), but growth was positive also in most other jurisdictions in the region. The narrow measure, which covers the non-bank financial intermediation activities that may pose bank-like financial stability risks, reached USD 27.7 trillion at end-2019, up from USD 24.4 trillion at end-2018, a faster growth rate (13.7%) than that observed in previous years (the compound growth rate for the 2013- 2018 period was 3.7%). Within the narrow measure, the fastest growth was in collective investment vehicles with features that make them susceptible to runs, which grew by 17.1% in 2019 and made up 76.2% of the narrow measure at end-2019.
The COVID-19 related market turmoil highlighted the structural vulnerabilities within the financial markets and stressed the role that interconnectedness, within the financial system, can play in the propagation and amplification of shocks. Specific to non-bank financial intermediation, the impact of the COVID-19 pandemic on market liquidity in the spring of 2020 re-emphasized that not only is it important to monitor developments in the non-bank financial intermediation sector, but also to understand how the sector interconnects with the rest of the financial system, including banks and across borders. Ultimately, this will help jurisdictions to better assess how vulnerabilities and shocks within the non-bank financial intermediation sector may lead to financial instability. The monitoring exercise is based on time series financial sector data from 14 participating jurisdictions, representing about 97% of GDP of the Americas’ region. The report also includes some recommendations to improve monitoring of the non-bank financial intermediation sector going forward. The continuation of the annual exercise, and its improvements on the closing of data gaps and risk measurement, are considered important areas for further development. It is also strongly suggested to update the data collection process and its granularity to align it more closely to the global monitoring exercise.
Keywords: International, Americas, Banking, Securities, Non-Bank Financial Intermediaries, NBFI, Credit Risk, Securitization, Financial Stability, Data Collection, Data Gaps, FSB
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