The FSB has designated reforms to non-bank financial intermediation (formerly referred to as “shadow banking”) as one of the priority areas for implementation monitoring. The reforms focus on five areas where the FSB has been coordinating and contributing to the development of policies:

  1. mitigating spill-over risks between the banking system and the system of non-bank financial intermediation;

  2. reducing the susceptibility of money market funds (MMFs) to “runs”;

  3. improving transparency and aligning incentives associated with securitisation;

  4. dampening procyclicality and other financial stability risks associated with securities financing transactions such as repos and securities lending; and

  5. assessing and mitigating systemic risks posed by other market-based 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 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 non-bank financial intermediation entities and activities (v);

  • Basel Committee on Banking Supervision (BCBS) on policy measures to mitigate risks in banks’ interactions with non-bank financial 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 global non-bank financial intermediation 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 monitoring report.

The FSB published in October 2019 its 2020 annual report on the implementation and effects of the G20 financial regulatory reforms. Below is an extract from this report on the status of implementation of non-bank financial intermediation-related reforms.

Implementation of NBFI reforms continues but it is at an earlier stage than other reforms.

  • Adoption of IOSCO recommendations to reduce the run risk of money market funds (MMFs) is most advanced in 16 FSB jurisdictions. The fair value approach for valuation of MMF portfolios is adopted in 23 jurisdictions (two more since 2019). Progress in liquidity management is less advanced, with 16 jurisdictions having reforms in effect (two more since 2019). IOSCO’s review of the consistency of implementation finds that the policy measures in nine jurisdictions that represent approximately 95% of global net MMF assets are generally in line with the IOSCO recommendations1.

Adoption is most advanced in the largest MMF markets (2020 Annual Report)

  • Adoption of the IOSCO recommendations on incentive alignment approaches for securitisation has been completed by 15 FSB jurisdictions.

Adoption of incentive alignment reforms in securitisation is uneven (2020 Annual Report)

  • Implementation of the FSB policy recommendations for securities financing transactions continues to face significant delays in some jurisdictions. Work is underway to adopt standards and processes on global securities financing data collection and aggregation.

  • Implementation of the FSB and IOSCO recommendations to address structural vulnerabilities from liquidity and leverage in asset management activities is ongoing.

Authorities have taken a number of measures relating to funds to respond to COVID-19.

  • Jurisdictions report enhanced monitoring of investment funds’ liquidity and redemptions; issuance of additional guidance; relaxation of certain regulatory thresholds (e.g. liquidity thresholds, borrowing limits and disclosure requirements); use of stress testing; and requirements for notification on the use of certain liquidity management tools.

Status of implementation

View status of implementation of reforms in priority areas by FSB jurisdictions as reported in the latest FSB annual report to G20 (as of November 2020)


1 See the IOSCO Level 2 Peer Review of Regulation of Money Market Funds (November 2020).