Transforming Shadow Banking into Resilient Market-Based Finance – Implementation
The FSB has designated shadow banking as one of the priority areas for implementation monitoring. They focus on five areas where the FSB has been coordinating and contributing to the development of policies:
- to mitigate risks in banks’ interactions with shadow banking entities;
- to reduce the susceptibility of money market funds (MMFs) to “runs”;
- to improve transparency and align the incentives in securitisation;
- to dampen procyclicality and other financial stability risks in securities financing transactions such as repos and securities lending; and
- to assess and mitigate financial stability risks posed by other shadow banking entities and activities.
The task of regular monitoring and reporting in this area is carried out by the FSB in collaboration with standard-setting bodies as follows:
- FSB workstreams on policy measures to dampen procyclicality and other financial stability risks in securities financing transactions (iv above), and on assessing and mitigating systemic risks posed by other shadow banking entities and activities (v);
- Basel Committee on Banking Supervision (BCBS) on policy measures to mitigate risks in banks’ interactions with shadow banking entities (i); and
- International Organization of Securities Commissions (IOSCO) on policy measures to reduce the susceptibility of money market funds (MMFs) to “runs” (ii), and to improve transparency and align incentives in securitisation (iii).
The FSB has also created a system-wide monitoring framework to track developments in the global shadow banking system with a view to identifying the build-up of systemic risks and initiating corrective actions where necessary. The main findings are presented in the annual FSB Global Shadow Banking Monitoring Report.
The FSB published its third annual report to the G20 on the implementation and effects of the G20 financial regulatory reforms in July 2017. Below is an extract from this report on the status of implementation of shadow banking-related reforms.