Leverage in Nonbank Financial Intermediation: Final report

9 July 2025 | PDF full text (504 KB)

Summary of document history

Summary of document history

Leverage in NBFI can be an important amplifier of stress. If not properly managed, it can create risks to financial stability.

This report addresses financial stability risks created by nonbank financial intermediation (NBFI) leverage, focusing on two key areas:

  1. risks that may arise in financial markets that are critical to the functioning of the financial system and the real economy;
  2. risks that may arise through interlinkages between leveraged nonbanks and systemically important financial institutions that act as leverage providers. 

Building on the policy steps already taken by authorities and the work done by the standard-setting bodies (SSBs), the report sets out an integrated approach for addressing NBFI leverage risks. Authorities are recommended to:

  • have a domestic framework in place to identify and monitor financial stability risks created by NBFI leverage in an effective, frequent, timely and proportionate manner;
  • select, design and calibrate policy measures, or combinations of measures, that address the financial stability risks identified in a flexible, targeted and proportionate way.

The recommendations reflect public feedback received on a consultative version of the report, which the FSB published in December 2024. They are structured around the following areas:

  • risk identification and monitoring (Recommendations 1-3);
  • addressing NBFI leverage in core financial markets (Recommendations 4-5);
  • counterparty credit risk management (Recommendations 6-7);
  • addressing incongruencies in regulatory treatment (Recommendation 8);
  • cross-border cooperation (Recommendation 9)

The report concludes with a set of general principles to help guide authorities in selecting, designing, and calibrating policy measures.

International cooperation on the implementation of the policy measures is critical to mitigate cross-border spillovers and avoid regulatory arbitrage. The FSB and SSBs will undertake further work to support and assist authorities in applying the recommendations.

FSB Recommendations to address the financial stability risks from leverage in NBFI

The FSB recommendations set out an integrated approach, according to which authorities should identify financial stability risks created by NBFI leverage and have appropriate policy measures in place to address the risks that they identify.

Recommendations relate to risk identification and monitoring. Authorities should:

  1. Have a domestic framework to identify and monitor in an effective, frequent, timely, and proportionate manner, the financial stability risks created by NBFI leverage.
  2. Assess and seek to address data challenges in their domestic risk identification and monitoring framework, and collaborate, where appropriate, with foreign authorities to reduce those challenges that may hinder effective cross-border risk identification and monitoring, including by promoting better data and information sharing.
  3. Review the granularity, frequency, and timeliness of existing public disclosures and determine the degree to which additional or enhanced disclosures should be provided to the public.

Recommendations relate to NBFI leverage in core financial markets. Authorities should:

  1. Take steps to address the financial stability risks created by NBFI leverage that they identify in their core financial markets.
  2. Consider those measures that are most appropriate to address the risks that they identify, including both activity- and entity-based measures, as well as concentration-related measures. In doing so, authorities should conduct appropriate analysis when selecting, designing and calibrating policy measures, to mitigate any unintended consequences.

Recommendations relate to counterparty credit risk management. Authorities should:

  1. Ensure the timely and thorough implementation of the BCBS’s guidelines on counterparty credit risk for bank leverage providers, which represent an important element of a comprehensive policy response to financial stability risks created by NBFI leverage.
  2. Review the adequacy of existing counterparty disclosure practices made privately between leveraged nonbanks and leverage providers and consider developing, in partnership with industry, mechanisms, standards and/or guidelines to enhance the effectiveness of these disclosure practices. 

In instances where various forms of NBFI leverage provision are subject to incongruent regulatory treatments which may result in regulatory arbitrage that can increase financial stability risks. Authorities should:

  1. determine whether and how to address the identified incongruences, having regard to the treatment of similar situations in other jurisdictions.

The last recommendation emphasises the importance of cross-border cooperation. Authorities should:

  1.  engage proactively with their peers to facilitate coordinated crisis and/or policy responses, to the extent legally and operationally feasible.

Leverage in Nonbank Financial Intermediation (NBFI): Overview of consultation responses and changes to the report to address them

| PDF full text (150 KB)

Summary of document history

Summary of document history

On 18 December 2024, the FSB published a consultation report on Leverage in Nonbank Financial Intermediation. The objective of the consultation was to gather stakeholder feedback on the proposed recommendations to address financial stability risks arising from leverage in nonbank financial intermediation.

The FSB received 36 responses to the consultation, which ended on 28 February 2025. The majority of responses came from asset managers and capital market and other financial market associations mainly based in the United States and Europe.

This note summarises the feedback received on the consultation report and sets out the main changes made to the final report in order to address them.

Enhancing the Resilience of Nonbank Financial Intermediation: Progress report

| PDF full text (628 KB)

The work carried out to date largely completes the original policy elements of the NBFI work programme. The FSB is therefore shifting its focus to implementation monitoring and the ongoing assessment of vulnerabilities in this sector.

The 2008 global financial crisis, the March 2020 market turmoil, and more recent episodes of market stress have demonstrated that NBFI can create or amplify systemic risk and underscored the need to take policy measures to enhance the sector’s resilience.

The work carried out to date largely completes the original policy elements of the NBFI work programme that were agreed in the aftermath of the March 2020 market turmoil. The focus now is on:

  • ongoing monitoring and in-depth assessment of specific vulnerabilities in NBFI;
  • further work to address data challenges;
  • information sharing and supervisory discussions on authorities’ policy approaches to enhance NBFI resilience; and
  • monitoring implementation of the agreed policies and evaluating their effects.

FSB Workplan to Address Nonbank Data Challenges

| PDF full text (231 KB)

Addressing data challenges is vital to the success of the FSB work programme aimed at building resilience in nonbank financial intermediation.

Taking forward the FSB’s work programme to enhance the monitoring of vulnerabilities in the nonbank sectors and to develop policy recommendations to address the associated financial stability risks depends heavily on reliable data.

In the course of its work, the FSB has identified several data challenges that have hindered the effective assessment of nonbank sector vulnerabilities by authorities.

Given the complexity and importance of ongoing data challenges, the FSB has set up a small, high-level task force: the Nonbank Data Task Force (NDTF). The NDTF, which is chaired by Andrew Bailey, Governor of the Bank of England and FSB Chair, has three objectives:

  1. Improve the ability of FSB member authorities to identify and assess vulnerabilities stemming from nonbank sectors.
  2. Improve the ability of authorities to assess and calibrate policies that could be used to mitigate financial stability vulnerabilities that stem from nonbank sectors.
  3. Explore whether and how authorities could share information (including data) when such sharing could be used to mitigate significant threats to financial stability.
NDTF Workplan

To test how much progress can be made in addressing various nonbank data challenges, the FSB has decided to conduct a test case on “leveraged trading strategies in sovereign bond markets”.

This report, delivered at the request of the G20, presents a plan for how the work on nonbank data challenges will be structured. The FSB intends to finalise a report on the selected test case by mid-2026, which should include ways to address data challenges. Based on the findings and insights from the work of the test case, the FSB will determine whether further work should be undertaken in other areas.

FSB publishes recommendations to address financial stability risks created by leverage in nonbank financial intermediation

Press enquiries:
+41 61 280 8477
[email protected]
Ref: 13/2025

  • Leverage recommendations give authorities flexibility to select, design and calibrate measures that best address financial stability risks created by NBFI leverage in their jurisdiction, while considering potential adverse effects.
  • NBFI progress report highlights the FSB’s shift from policymaking to monitoring NBFI vulnerabilities, addressing data challenges, sharing members’ insights and policy approaches, and evaluating policy implementation.
  • A Nonbank Data Task Force, chaired by FSB Chair Andrew Bailey, is assessing ways to address key nonbank data challenges through a test case on leveraged trading strategies in sovereign bond markets.

The Financial Stability Board (FSB) today published three reports related to its work programme to enhance resilience in nonbank financial intermediation (NBFI).

Final policy recommendations to address financial stability risks created by NBFI leverage

The recommendations on NBFI leverage, which have been delivered to the G20, set out an integrated approach for addressing financial stability risks created by NBFI leverage. Under this approach, authorities should identify such risks and have appropriate policy measures in place to address the risks they identify. The recommendations provide authorities with flexibility to tailor their policy responses to their jurisdiction-specific circumstances. This includes selecting, designing, and calibrating policy measures – or combinations of measures – that address financial stability risks, while considering potential adverse effects. Authorities will share their policy responses, for example, through FSB supervisory discussions.

The recommendations are directed at FSB member authorities and focus on markets, entities, and activities where NBFI leverage poses financial stability risks. These risks vary across jurisdictions. The FSB and standard-setting bodies (SSBs) will undertake further work to support and assist authorities in applying the recommendations. This work will begin with supervisory discussions among authorities and, later this year, members will consider whether to pursue follow-up work on certain recommendations, including defining the potential scope of that work.

The recommendations reflect feedback from a public consultation. In particular, the FSB acknowledges the high degree of heterogeneity of nonbanks; that leverage in some NBFI segments is relatively limited and is not likely to pose financial stability risks; the differences between banks and various types of nonbanks, which have motivated different regulatory approaches; and that certain leveraged activities by nonbanks can facilitate hedging, enhance efficiency and support liquidity in financial markets.

Annual NBFI progress report

The 2025 NBFI Progress Report notes that the work carried out to date largely completes the original policy elements of the FSB’s NBFI work programme, which were agreed upon in response to the March 2020 market turmoil. The FSB’s work will now shift from policymaking to assessing vulnerabilities, addressing data challenges, sharing members’ policy insights, and evaluating the implementation and impact of reforms.

Workplan to address nonbank data challenges

In carrying out the NBFI work programme, the FSB identified several data challenges that hinder authorities’ ability to effectively assess vulnerabilities in the nonbank sectors. To address this, the FSB has established the Nonbank Data Task Force (NDTF), chaired by the FSB Chair, Andrew Bailey. The NDTF has three objectives:

  1. Improve the ability of FSB member authorities to identify and assess vulnerabilities stemming from nonbank sectors.
  2. Improve the ability of authorities to assess and calibrate policies to mitigate financial stability risks stemming from nonbank sectors.
  3. Explore whether and how authorities could share information, including data, to mitigate significant financial stability threats.

As part of this work, the FSB has launched a test case on leveraged trading strategies in sovereign bond markets to assess how much progress can be made in addressing key nonbank data challenges. This area was chosen due to its critical importance to financial stability and the key data challenges it presents, including some with a significant cross-border dimension.

At the request of the South African G20 Presidency, the FSB is submitting a workplan to address nonbank data challenges, which outlines how the NDTF’s work will be structured and the next steps. The FSB will publish a report on the NDTF test case by mid-2026, detailing ways to address the identified data challenges. Following this, the FSB will determine whether further work should be undertaken in other areas.

In parallel, the FSB has also decided to conduct an analytical deep dive on vulnerabilities in private credit, which will include the identification of data challenges in this area.

Notes to editors

The FSB published in November 2020 a Holistic Review of the March Market Turmoil, which laid out a comprehensive and ambitious work programme for strengthening the resilience of the NBFI sector while preserving its benefits. This work is being carried out within the FSB as well as by its member SSBs and international organisations, to ensure that relevant experiences and perspectives are brought to bear.

The FSB coordinates at the international level the work of national financial authorities and international standard-setting bodies and develops and promotes the implementation of effective regulatory, supervisory, and other financial sector policies in the interest of financial stability. It brings together national authorities responsible for financial stability in 24 countries and jurisdictions, international financial institutions, sector-specific international groupings of regulators and supervisors, and committees of central bank experts. The FSB also conducts outreach with approximately 70 other jurisdictions through its six Regional Consultative Groups.

The FSB is chaired by Andrew Bailey, Governor of the Bank of England. The FSB Secretariat is located in Basel, Switzerland and hosted by the Bank for International Settlements.

Public webinar on the FSB’s recommendations to address leverage in nonbank financial intermediation

23 June 2025

Summary of document history

Summary of document history

The FSB held a webinar to present its recommendations to address risks arising from leverage in nonbank financial intermediation on Wednesday 9 July, hosted by the Bank of England

On Wednesday 9 July, the FSB published its recommendations to address financial stability risks arising from leverage in nonbank financial intermediation. The recommendations follow a public consultation and incorporate the feedback received from it.

 The webinar was hosted by Andrew Bailey, Chair of the Financial Stability Board and Governor of the Bank of England. He will be joined by:

  • Cornelia Holthausen, Director General, DG Macroprudential Policy and Financial Stability, European Central Bank
  • Sarah Pritchard, Executive Director, UK Financial Conduct Authority
  • John Schindler, Secretary General, Financial Stability Board

 This webinar was open to all.

FSB examines vulnerabilities in non-bank commercial real estate (CRE) investors

19 June 2025

Press enquiries:
+41 61 280 8477
[email protected]
Ref: 12/2025

  • FSB identifies liquidity mismatches, leverage, and valuation opacity as the main vulnerabilities in real estate investment trusts (REITs) and property funds.
  • Report also notes complex interlinkages between banks and non-bank CRE investors, which increases the potential for spillovers from CRE market shocks.
  • Report underscores the importance of closing data gaps to enhance authorities’ ability to monitor risks from non-banks’ involvement in CRE.

The Financial Stability Board (FSB) today published a report analysing the vulnerabilities in non-bank commercial real estate investors. The report builds on the findings of the 2024 FSB report on interest rate and liquidity risks in the financial system, which identified non-bank CRE investors – comprising real estate investment trusts (REITs), property funds, and other non-bank mortgage lenders – as one of the entity types vulnerable to higher interest rates.

Data from FSB members suggests banks and nonbanks collectively provided at least $12 trillion in equity and debt financing to CRE in 2023. While banks remain the main source of such financing, non-bank investors – particularly property funds and REITs – play a significant role in some jurisdictions. The report identifies three main vulnerabilities in these investors:

The report also highlights the complex interlinkages between banks and non-bank CRE investors. Banks are the main debt providers to, and can also invest in, REITs and property funds. Banks may also have common asset exposures to these investors, which increases the potential for shocks to the CRE market spilling over to the banking sector. A more complete overview of these interlinkages is limited by considerable data gaps, despite improvements in recent years. Closing some of these gaps would enhance authorities’ ability to monitor risks.

So far, the global financial system has weathered the recent adverse developments in the CRE market. This can be attributed to the market’s heterogeneity; lower loan-to-value levels than previous episodes of stress; and the ability of some distressed borrowers to refinance. However, ongoing monitoring of the market is warranted given the more volatile performance of CRE exposures compared to other assets, structural shifts in demand, and the effects of extreme weather events and new energy efficiency standards in some jurisdictions.

Notes to editors

The FSB coordinates at the international level the work of national financial authorities and international standard-setting bodies and develops and promotes the implementation of effective regulatory, supervisory, and other financial sector policies in the interest of financial stability. It brings together national authorities responsible for financial stability in 24 countries and jurisdictions, international financial institutions, sector-specific international groupings of regulators and supervisors, and committees of central bank experts. The FSB also conducts outreach with approximately 70 other jurisdictions through its six Regional Consultative Groups.

The FSB is chaired by Klaas Knot, President of De Nederlandsche Bank. The FSB Secretariat is located in Basel, Switzerland and hosted by the Bank for International Settlements.

Vulnerabilities in Non-bank Commercial Real Estate Investors

| PDF full text (3 MB)

Ongoing monitoring of the commercial real estate (CRE) market is warranted given the more volatile performance of CRE exposures compared to other assets, structural shifts in demand, and other factors.

The commercial real estate (CRE) market has experienced significant stress in recent years. Certain segments, such as offices and retail space, experienced weak demand since the COVID-19 pandemic due to the shift to home working. Stress was also caused by the increased borrowing costs that took place in 2022 and 2023 in a number of advanced economies. The 2024 FSB report on the confluence of interest rate and liquidity risks in the financial system identified, among other things, non-bank CRE investors – comprising real estate investment trusts (REITs), property funds, and other non-bank mortgage lenders – as one of the entity types vulnerable to higher interest rates.

This report examines the main vulnerabilities associated with non-bank CRE investors, particularly REITs and property funds. It provides an overview of global CRE markets, looking at definitions, market size, and recent performance trends, as well as exposures and interlinkages among market participants. The report also identifies data gaps that hinder effective monitoring of non-banks’ involvement in CRE at a jurisdictional and global level.

See more charts by selecting from the dropdown menu

Source: FSB

Changes since 2018

2018 = 100

The trends for TR coincide with the high inflation taking place since November 2021 and is displayed on the left axis for some panels.

Source: FSB member submissions; JLL Research.

Source: MSCI (2024), Real Estate Market Size, July.

FSB Regional Consultative Group for the Americas meets in Nassau

17 June 2025

The Financial Stability Board (FSB) Regional Consultative Group for the Americas met on 17 June in Nassau, hosted by the Central Bank of the Bahamas.

The meeting, which brings together senior officials from central banks, financial authorities and regulatory bodies in the region covered:

  • Global financial market developments and the outlook for financial stability in the region.
  • Progress toward achieving the goals of the G20 Roadmap to enhance cross-border payments.
  • Recent developments and approaches to monitoring vulnerabilities in the non-bank financial intermediation sector.

Members thanked the out-going chairs, Tiff Macklem and Kenneth Baker, and discussed potential future topics for collaboration and exploration.

FSB Regional Consultative Group for Sub-Saharan Africa meets in Livingstone

The Financial Stability Board (FSB) Regional Consultative Group for Sub-Saharan Africa (RCG SSA) met on 17 June in Livingstone, hosted by the Bank of Zambia.

Members exchanged views on financial vulnerabilities at the global and regional level; the impact of extreme weather events in Sub-Saharan Africa and how the private and public sectors can best prepare for such events; and progress on the G20 Roadmap on cross-border payments, including challenges faced by both the public and private sector to effect tangible improvements in payment arrangements.

Members also shared recent regional developments in crypto-assets and stablecoins, including steps to implement the FSB’s regulatory framework.