Non-bank financial intermediation provides a valuable alternative to bank financing and helps to support real economic activity. However, if such intermediation involves activities that are typically performed by banks, such as maturity/liquidity transformation and/or the creation of leverage, it can become a source of systemic risk. This risk can be compounded where non-bank activities have links to the banking system.

In response to a G20 Leaders’ request at the Seoul Summit in 2010, the FSB adopted a two-pronged strategy to address the financial stability risks in non-bank financial intermediation (previously called shadow banking):

  • Monitoring – an annual system-wide monitoring exercise to assess global trends and risks from non-bank financial intermediation; and

  • Policymaking – developing a range of policies to address financial stability risks from non-bank financial intermediation.

The objective of the FSB’s work is to ensure that non-bank financial intermediation is subject to appropriate oversight and regulation to address bank-like risks to financial stability emerging outside of the regular banking system, while not inhibiting sustainable non-bank financing models that do not pose such risks. The approach is designed to be proportionate to financial stability risks, focusing on those activities that are material to the system, using as a starting point those that were a source of problems during the crisis.

In October 2018, the FSB announced that it would replace the term “shadow banking” with the term “non-bank financial intermediation” in future communications. The change in terminology is intended to emphasise the forward-looking aspects of the FSB’s work to enhance the resilience of non-bank financial intermediation, and clarify the use of technical terms. The change in terminology does not affect the substance of the agreed monitoring framework and policy recommendations.


To assess global trends and risks in non-bank financial intermediation (NBFI), the Financial Stability Board (FSB) has been conducting an annual monitoring exercise since 2011. The monitoring exercise starts by casting the net wide to take a view of assets across all financial sectors and then focuses on the subset of non-bank financial intermediation with increased potential for systemic risks, and/or regulatory arbitrage. To arrive at the narrow measure, non-bank financial entities are classified into five economic functions (or activities), each of which involves bank-like financial stability risks (ie credit intermediation that involves maturity/liquidity transformation, leverage or imperfect credit risk transfer).

FSB NBFI Report 2019 - Exhibit 0-1

The inclusion of non-bank financial entities or activities in the narrow measure is based on a conservative assessment of the risks such entities or activities may pose, especially during stressed events, on a pre-mitigant basis (reflecting an assumption that policy measures and/or risk management tools are not exercised). This allows authorities to separately assess existing policy tools to address financial stability risks from non-bank financial intermediation and identify any residual risks or activities that may warrant policy responses.

The latest monitoring report was published in January 2020, and found that the narrow measure 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. Within the narrow measure, collective investment vehicles with features that make them susceptible to runs grew by 0.4% in 2018 and represents 72% of the narrow measure. Non-bank financial entities engaged in loan provision that is dependent on short-term funding, such as finance companies, grew by 6.9%% in 2018, and form 7.0% of the narrow measure. Market intermediaries that depend on short-term funding or secured funding of client assets (e.g. broker-dealers) grew by 8.7%, and form 8.8% of the narrow measure.


At the November 2010 Seoul Summit, the G20 Leaders asked the FSB to develop policy recommendations to strengthen the oversight and regulation of non-bank financial intermediation (previously called shadow banking). The FSB has been coordinating and contributing to the development of policies in five areas where oversight and regulation need to be strengthened to mitigate the potential systemic risks associated with non-bank financial intermediation, namely:

  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 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 non-bank financial entities and activities.

When implemented, this integrated set of policies should mitigate bank-like financial stability risks from non-bank financial intermediation and enhance its resilience so that it can support sustainable economic growth. The FSB’s annual report on the implementation and effects of the G20 financial regulatory reforms provides an update on implementation of the agreed reforms.

In July 2017, the FSB reported to the G20 Leaders its assessment of the evolution of non-bank financial intermediation activities and risks since the global financial crisis, and the adequacy of post-crisis policies and monitoring to address these risks. The assessment underscored the importance of a system-wide oversight framework, and recommended further strengthening of the oversight and monitoring of non-bank financial intermediation and enhancements to the data collection framework. At the time of the assessment, the FSB did not identify new financial stability risks that would warrant additional regulatory action at the global level. However, since non-bank financial intermediation evolves over time, authorities should continue to vigilantly monitor and address emerging financial stability risks, and keep up to date the regulatory perimeter”. To address residual gaps and further enhance oversight, FSB member authorities agreed on seven recommendations, which are described in the assessment.