FSB publishes annual report on non-bank financial intermediation

19 January 2020

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Ref no: 1/2020

The Financial Stability Board (FSB) today published the Global Monitoring Report on Non-Bank Financial Intermediation 2019. The report presents the results of the FSB’s annual monitoring exercise to assess global trends and risks from non-bank financial intermediation (NBFI).

The annual monitoring exercise is an important part of the FSB’s policy framework to enhance the resilience of NBFI. It covers data up to end-2018 from 29 jurisdictions, which together represent over 80% of global GDP. The FSB focuses particularly on those parts of NBFI that may pose bank-like financial stability risks and/or regulatory arbitrage (i.e. the narrow measure of NBFI).

Main findings from the 2019 monitoring exercise include:

  • Total global financial assets grew by 1.4% to $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 (OFIs)1 declined marginally as a result of stock market declines in late 2018 and, to a lesser extent, outflows from some of these entities.

  • The narrow measure of NBFI grew by 1.7%, to $50.9 trillion in 2018, significantly slower than the 2012-17 average annual growth rate of 8.5%. It now represents 13.6% of total global financial assets. 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 OFIs has continued to grow. OFI lending assets grew by 3.0% in 2018, largely driven by the euro area.

  • Interconnectedness between banks and OFIs through credit and funding relationships has been largely unchanged since 2016. Investment funds and money market funds remain the largest OFI providers of credit to banks.

Klaas Knot, Chair of the FSB Standing Committee on Assessment of Vulnerabilities, said: “Non-banks play an increasingly important role in the global financial system. The FSB’s monitoring report provides a significant resource for authorities to assess trends and risks from NBFI. Such information is essential for a forward-looking, system-wide oversight framework.”

Notes to editors

In response to a G20 Leaders’ request at the Seoul Summit in 2010, the FSB adopted a two-pronged strategy to address financial stability risks in NBFI (previously called shadow banking). First, it created a system-wide monitoring framework to track developments in NBFI with a view to identifying the build-up of systemic risks and initiating corrective actions where necessary. Second, it has been coordinating and contributing to the development of policies to mitigate potential systemic risks associated with NBFI.

The FSB will continue to monitor and assess developments to ensure that non-bank financing is resilient. As noted in its work programme for 2020, the FSB will further strengthen its annual NBFI monitoring exercise and data framework to assess the evolution of risks from NBFI developments globally. It will also review the organisation of its work on NBFI this year.

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 Randal K. Quarles, Governor and Vice Chairman for Supervision, US Federal Reserve; its Vice Chair is Klaas Knot, President of De Nederlandsche Bank. The FSB Secretariat is located in Basel, Switzerland, and hosted by the Bank for International Settlements.

Press release available as: PDF
  1. OFIs includes all financial institutions that are not central banks, banks, insurance corporations, pension funds, public financial institutions or financial auxiliaries. [←]

2019 Underlying data for exhibits

16 January 2020

2019 Monitoring Dataset

2019 Reporting templates

Clock Synchronisation

View the Standard

Accurate and precise time stamps can help regulators reconstruct past events, which may occur on different markets or in different jurisdictions. Regulatory authorities can better use time stamps from synchronised clocks to more effectively monitor and identify instances of potential market abuse and analyse market events for regulatory purposes. Therefore, IOSCO believes that member jurisdictions would likely benefit from establishing a common expectation with respect to timestamping and clock synchronisation for the purposes of recording trade and related events.

Given the heterogeneity of the markets across member jurisdictions, each market authority is best placed to determine an acceptable level of accuracy and granularity of the timestamp in their jurisdiction. However, IOSCO recommends that member jurisdictions use UTC as the standard reference time source to the extent that they have adopted or are considering adopting requirements on clock synchronisation. In jurisdictions with clock synchronisation requirements for trading venues and their participants, setting out a reference time is important in clarifying the timestamping requirement on reportable events. This may be achieved in various ways as jurisdictions have different regulatory frameworks and approaches, and not all regulators require time stamping by registered entities and so do not necessarily require a regulatory change.

Financial Soundness Indicators Compilation Guide (2019 FSIs Guide)

27 December 2019

View the Standard

The purpose of this Manual is to facilitate the compilation and cross-country comparability of FSIs to assist users in their macroprudential financial surveillance of the financial system. It incorporates changes in international regulatory standards embodied in the Basel III reform – including new definitions and measures of capital and new global liquidity standards,  as well as revisions to the International Financial Reporting Standards, while providing practical advice on compilation issues, which are relevant for macroprudential policy and financial stability analysis.

Solvent Wind-down of Derivatives and Trading Portfolios: Overview of responses to the consultation

20 December 2019 | PDF full text (146 KB)

On 3 June 2019, the FSB published a consultative document on Solvent Wind-down of Derivatives and Trading Portfolios. The note summarises the responses to the public consultation and provides an overview of the responses to those comments.

After carefully considering these comments and the fact that many capabilities necessary to support the preparation and execution of solvent wind-down are not specific to solvent wind-down planning, the FSB has decided not to develop further guidance at this stage. Since solvent wind-down planning is an integral part of resolution planning, it needs to be consistent with a firm’s resolution strategy and plan. The FSB will therefore continue to promote solvent wind-down planning as part of overall resolution planning.

Public Disclosures on Resolution Planning and Resolvability: Overview of responses to the consultation

| PDF full text (149 KB)

On 3 June 2019, the FSB published a consultative document on Public Disclosure of Resolution Planning and Resolvability. The note summarises the main points from the responses to this public consultation.

The FSB does not plan to develop further guidance on resolution disclosures at this stage. However, it will continue to encourage appropriate levels of disclosure by authorities of their general resolution policies and by firms, as applicable, of firm-specific disclosures. It will also consider how to collect and share references to authorities’ disclosures of general resolution-related policies, including policy proposals, in particular rules with possible cross-border effects. In 2022, the FSB will revisit the question of whether further guidance is needed.

Vulnerabilities associated with leveraged loans and collateralised loan obligations

19 December 2019 | PDF full text (2 MB)

This report assesses the financial stability implications of developments in the leveraged loan and CLO markets. It provides a global perspective by combining available data and analyses from FSB members.

Markets for leveraged loans and CLOs have grown significantly in recent years, with the majority of issuance concentrated in the US and to a lesser extent the European Union. The securitisation of leveraged loans through CLO issuance, which had come to a halt almost entirely between 2009 and 2010, exceeded pre-crisis levels in 2014 and has remained strong since then. While most leveraged loans are originated and held by banks, and banks have the largest exposure to the market, the role of non-bank financial institutions has increased.

The report concludes that:

  • Vulnerabilities in the leveraged loan and CLO markets have grown since the global financial crisis. Borrowers’ leverage has increased; changes in loan documentation have weakened creditor protection; and shifts in the composition of creditors of non-banks may have increased the complexity of these markets.
  • Banks have the largest direct exposures to leveraged loans and CLOs. These exposures are concentrated among a limited number of large global banks and have a significant cross-border dimension.
  • A number of non-bank investors, including investment funds and insurance companies, are also exposed to the leveraged loan and CLO markets.
  • Given data gaps, a comprehensive assessment of the system-wide implications of the exposures of financial institutions to leveraged loans and CLOs is challenging.

Using supervisory and market data, the report identifies the direct holders of roughly 79% of leveraged loans and 86% of CLOs. Little is known, however, about the direct exposures of certain non-bank investors to these markets. Including their holdings of lower-rated CLO tranches. The FSB will consider whether there is scope to close data gaps, will continue to analyse the financial stability risks and will discuss the regulatory and supervisory implications associated with leveraged loans and CLOs.

FSB report assesses vulnerabilities of leveraged loans and CLOs

Press enquiries:
+41 61 280 8138
[email protected]
Ref no: 45/2019

The Financial Stability Board (FSB) today published a report on Vulnerabilities associated with leveraged loans and collateralised loan obligations (CLOs). The report assesses the financial stability implications of developments in the leveraged loan and CLO markets. It provides a global perspective by combining available data and analyses from FSB members.

Markets for leveraged loans and CLOs have grown significantly in recent years, with the majority of issuance concentrated in the US and to a lesser extent the European Union. The securitisation of leveraged loans through CLO issuance, which had come to a halt almost entirely between 2009 and 2010, exceeded pre-crisis levels in 2014 and has remained strong since then. While most leveraged loans are originated and held by banks, and banks have the largest exposure to the market, the role of non-bank financial institutions has increased.

The report concludes that:

  • Vulnerabilities in the leveraged loan and CLO markets have grown since the global financial crisis. Borrowers’ leverage has increased; changes in loan documentation have weakened creditor protection; and shifts in the composition of creditors of non-banks may have increased the complexity of these markets.
  • Banks have the largest direct exposures to leveraged loans and CLOs. These exposures are concentrated among a limited number of large global banks and have a significant cross-border dimension.
  • A number of non-bank investors, including investment funds and insurance companies, are also exposed to the leveraged loan and CLO markets.
  • Given data gaps, a comprehensive assessment of the system-wide implications of the exposures of financial institutions to leveraged loans and CLOs is challenging.

Using supervisory and market data, the report identifies the direct holders of roughly 79% of leveraged loans and 86% of CLOs. Little is known, however, about the direct exposures of certain non-bank investors to these markets. Including their holdings of lower-rated CLO tranches. The FSB will consider whether there is scope to close data gaps, will continue to analyse the financial stability risks and will discuss the regulatory and supervisory implications associated with leveraged loans and CLOs.

FSB Chair Randal K. Quarles said: “Scanning the horizon to identify, assess and address new and emerging risks to global financial stability is at the core of the FSB mandate. This report provides a fact base that authorities and market participants can use to help assess the risks posed by leveraged loan and CLO markets and respond accordingly.”

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 Randal K. Quarles, Governor and Vice Chairman for Supervision, US Federal Reserve; its Vice Chair is Klaas Knot, President of De Nederlandsche Bank. The FSB Secretariat is located in Basel, Switzerland, and hosted by the Bank for International Settlements.