Regulators to intensify scrutiny of non-bank intermediaries

Non-banks are regulated by securities regulators, which have in the past rejected attempts by central banks to impose bank-like rules on the sector.

Global banking and securities regulators are focusing on improving the NBFI sector’s resilience to market disruptions, with proposals for open-ended funds expected in the coming weeks, after money market funds were discussed .

“Although the Committee focuses on the global banking system, the growth of NBFIs is important, given the interconnections between banks and NBFIs,” according to Pablo Hernández de Cos, President of the World Basel Committee which writes bank capital standards that apply around the world.

It should be an open question whether more needs to be done to protect banks from non-bank risk, for example through macroprudential policy, which often refers to measures such as a sector capital buffer to cover a specific risk.

“We also plan to develop further guidance on NBFI risk management later this year,” said de Cos, who is also Governor of the Bank of Spain. “While much progress has been made in strengthening banks’ resistance to NBFIs, the question is whether it is enough.”

To date, virtually all NBFI distress episodes have involved banks, either directly or through indirect channels, de Cos added.