Financial Stability Board (FSB)

December 16, 2021 – Financial Stability Board (FSB)

FSB Non-Bank Financial Intermediation

The FSB issued a report on global trends, risks in non-bank financial intermediation (NBFI). The 2021 report describes developments during the first year of the COVID-19 pandemic.
Monitoring Report
The report considers data from 29 jurisdictions, representing more than 80% global GDP. It focuses particularly on those parts of NBFI that may pose bank-like financial stability risks and/or involve regulatory arbitrage (the so-called narrow measure of NBFI). Covers NBFI developments for year ending 12/31/2020 period that included both COVID shock, steps taken to stabilize financial markets, support financing to economy.

Main Findings
In contrast to trend over past decade, the NBFI sector grew less than banking sector in 2020. The NBFI share of financial assets declined from 49.7% to 48.3%, due to COVID. Banks’ balance sheet linkages with NBFI sector decreased, liabilities to NBFI sector were lower in 2020 but banks continue to be net recipients of funding from NBFI entities. The assets of NBFI entities classified into 5 economic functions set out in FSB monitoring approach grew more slowly in 2020 than in 2019, but all functions saw growth in assets. Despite substantial volatility in financial markets observed during the first half of 2020, balance sheet measures of vulnerability in NBFI appear broadly stable year-to-year. Rapid stabilization in credit intermediation, maturity and liquidity transformation, and leverage measures highlights the rapid response, impact of official sector intervention. Data availability/quality are evolving as the scope to improve to capture NBFI vulnerabilities increases.

Next Steps

The COVID experience created important challenges for annual global monitoring exercise and the current design of this exercise. The FSB will consider developing more refined indicators going forward.

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