FSB Assesses Global Nonbank Financial Intermediation Activity for 2018
FSB published a report that presents results of the eighth annual monitoring exercise, which assesses global trends and risks from nonbank financial intermediation (NBFI) in 2018. It covers data up to the end of 2017 from 29 jurisdictions, which together represent over 80% of global GDP. With the 2018 report, FSB moves away from the term shadow banking and adopts NBFI, to emphasize the forward-looking aspect of the its work. This change in terminology does not affect either the substance or the coverage of the monitoring exercise.
The report first introduces the monitoring approach of FSB, including its scope, data, and terminology. It then describes recent innovations in NBFI and provides an overview of the size and growth of all sectors in the financial system, including central banks, banks, public financial institutions, insurance corporations, pension funds, other financial intermediaries (OFIs), and financial auxiliaries.. Next, the report assesses the interconnectedness between non-bank financial entities and banks and between non-bank financial entities and cross-border linkages. Finally, the report focuses on those parts of NBFI where bank-like financial stability risks may arise. The report also features case studies that discuss various aspects of non-bank financial entities and activities in greater detail. These include fintech credit, recent developments in the leveraged loan markets and the role of non-bank financial intermediaries, the non-bank credit cycle, cross-border movements of NBFI systems, and the use of credit default swaps by non-bank financial institutions in EU.
The main findings from the 2018 monitoring exercise include the following:
- The narrow measure of NBFI grew by 8.5% to USD 51.6 trillion in 2017, a slightly slower pace than during 2011-16.
- Collective investment vehicles with features that make them susceptible to runs continued to drive the overall growth of the narrow measure in 2017.
- Securitization-based credit intermediation increased by 9% in 2017, to account for 10% of the narrow measure, primarily driven by growth in trust company assets and securitizations.
- In 2017, the wider OFIs in aggregate, grew by 7.6% to USD 116.6 trillion in 21 jurisdictions and the euro area, growing faster than the assets of banks, insurance corporations, and pension funds. OFI assets represent 30.5% of the total global financial assets, the largest share on record. Among the OFI sub-sectors, structured finance vehicles grew in 2017 for the first time since the financial crisis.
- Investment funds and money market funds are the largest OFI sub-sectors that provide credit to banks. In aggregate, banks and OFIs have become marginally more interconnected through credit and funding relationships in 2017, remaining near the 2003-06 levels.
Related Links
Keywords: International, Banking, Insurance, Securities, NBFI, Financial Stability, Shadow Banking, Monitoring, FSB
Related Articles
HKMA Urges Early Action for Adherence to IBOR Fallbacks Protocol
HKMA urged authorized institutions to take early action to adhere to the IBOR Fallbacks Protocol, which ISDA is expected to publish soon.
FSB Sets Out Roadmap for Transition to Alternative Reference Rates
FSB published a global transition roadmap for London Inter-bank Offered Rate (LIBOR).
HM Treasury Publishes Response to Proposal on BRRD2 Transposition
HM Treasury published a document that summarizes the responses received from a consultation on the approach of UK to transposition of the revised Bank Resolution and Recovery Directive (BRRD2).
HM Treasury Publishes Response to Proposal on CRD5 Transposition
HM Treasury published the government response to the feedback received on the consultation for updating the prudential regime of UK before the end of the Brexit transition period.
PRA Updates Supervisory Statement on Counterparty Credit Risk
PRA published the final policy statement PS22/20, which contains the updated supervisory statement SS12/13 on counterparty credit risk.
FSB Publishes Update on Work to Address Market Fragmentation
FSB published an update on its work to address market fragmentation. FSB is working in this area in collaboration with the other standard-setting bodies.
EBA Proposes to Revise Guidelines on Incident Reporting Under PSD2
EBA proposed revisions to the guidelines on major incident reporting under the second Payment Service Directive (PSD2).
EBA Finalizes Standards for Prudential Treatment of Software Assets
EBA published the final draft regulatory technical standards specifying the methodology for prudential treatment of software assets by banks.
FSB Publishes Roadmap on Cross-Border Payments, Report on Stablecoins
FSB published a report presenting the roadmap to enhance cross-border payments by providing a high-level plan that sets ambitious but achievable goals and milestones in the five focus areas.
EIOPA Urges Insurers to Prepare for End of Brexit Transition
In a recent communication, EIOPA urged the insurance sector to complete its preparations for the end of the Brexit transition period on December 31, 2020.
