FSB Report Examines Global Nonbank Financial Intermediation Activity
FSB published the ninth annual report examining the global non-bank financial intermediation activity. The report presents global trends and risks from non-bank financial intermediation. It compares the size and trends of financial sectors, in aggregate and, across jurisdictions, primarily using the sectoral balance sheet data. The report covers data till the end of 2018 from 29 jurisdictions, which together represent over 80% of the global Gross Domestic Product. FSB focuses on the parts of non-bank financial intermediation that may pose bank-like financial stability risks and/or regulatory arbitrage (that is, the narrow measure of non-bank financial intermediation).
In addition to examining the trends and risks in global non-bank financial intermediation, the report assesses the interconnectedness among financial entities, both within and across borders. The report features case studies that discuss different aspects of non-bank financial intermediation in greater detail. They include flow and valuation effects in the investment fund sector, the role of non-bank financial institutions in providing financing to commercial real estate, and the role of investment funds in cross-border capital flows. The main findings from the 2019 monitoring exercise include the following:
- Total global financial assets grew by 1.4% to USD 378.9 trillion in 2018, driven largely by banks. Assets of insurance corporations and pension funds remained largely unchanged, while those of other financial intermediaries declined marginally as a result of stock market declines in late 2018 and, to a lesser extent, outflows from some of these entities. Other financial intermediaries include all financial institutions that are not central banks, banks, insurance corporations, pension funds, public financial institutions, or financial auxiliaries.
- The narrow measure of non-bank financial intermediation grew by 1.7%, to USD 50.9 trillion in 2018, significantly slower than the 2012-17 average annual growth rate of 8.5%. It now represents 13.6% of the total global financial assets. Entities engaged in securitization-based credit intermediation, such as securitization vehicles, remained unchanged in terms of nominal value in 2018, representing 9.3% of the narrow measure. Collective investment vehicles with features that make them susceptible to runs grew by 0.4% in 2018, much slower than the 11% average annual growth rate from 2012-17. At the end of 2018, such collective investment vehicles represented 72% of the narrow measure.
- Lending by other financial intermediaries continued to grow and their lending assets grew by 3.0% in 2018, largely driven by the euro area. However, banks remain the single largest source of credit intermediation.
- Interconnectedness between banks and other financial intermediaries through credit and funding relationships remains largely unchanged since 2016. Investment funds and money market funds remain the largest other financial intermediary providers of credit to banks.
Related Links
Keywords: International, Banking, Insurance, Pensions, Securities, Shadow Banking, Financial Stability, NBFI, FSB
Related Articles
PRA and FPC Finalize Changes to Leverage Ratio Framework in UK
The Prudential Regulation Authority (PRA) published the final policy statement PS21/21 on the leverage ratio framework in the UK. PS21/21, which sets out the final policy of both the Financial Policy Committee (FPC) and PRA
CFPB Proposes Rule on Small Business Lending Data Collection
The Consumer Financial Protection Bureau (CFPB) proposed to amend Regulation B to implement changes to the Equal Credit Opportunity Act (ECOA) under Section 1071 of the Dodd-Frank Act.
PRA Decides to Maintain O-SII Buffers for Another Year
The Prudential Regulation Authority (PRA) decided to maintain, at the 2019 levels, the buffer rates for the Other Systemically Important Institutions (O-SII) for another year, with no new rates to be set until December 2023.
FSB Report Assesses Implementation of Recommendations on Stablecoins
The Financial Stability Board (FSB) published a progress report on implementation of its high-level recommendations for the regulation, supervision, and oversight of global stablecoin arrangements.
APRA Updates Loan Serviceability Expectations for Home Lending
In a letter to the authorized deposit taking institutions, the Australian Prudential Regulation Authority (APRA) announced an increase in the minimum interest rate buffer it expects banks to use when assessing the serviceability of home loan applications.
CPMI and IOSCO Consult on Guidance on Stablecoin Arrangements
The Committee on Payments and Market Infrastructures (CPMI) and the International Organization of Securities Commissions (IOSCO) are consulting on the preliminary guidance that clarifies that stablecoin arrangements should observe international standards for payment, clearing, and settlement systems.
EBA and EIOPA Set Out Work Priorities for 2022
The European Banking Authority (EBA) and the European Insurance and Occupational Pensions Authority (EIOPA) have set out their respective work priorities for 2022.
MFSA Issues Reporting Updates and Guidance for Banks
The Malta Financial Services Authority (MFSA) updated the guidelines on supervisory reporting requirements under the reporting framework 3.0, in addition to the reporting module on leverage under the common reporting (COREP) framework.
EC Publishes Decision on List of Equivalent Third Countries Under CRR
The European Commission (EC) published the Implementing Decision 2021/1753 on the equivalence of supervisory and regulatory requirements of certain third countries and territories for the purposes of the treatment of exposures, in accordance with the Capital Requirements Regulation or CRR (575/2013).
EC Rule on Contractual Recognition of Write-Down and Conversion Powers
EC published the Implementing Regulation 2021/1751, which lays down implementing technical standards on uniform formats and templates for notification of determination of the impracticability of including contractual recognition of write-down and conversion powers.
