Sunday, June 4, 2017

FSB Publishes its Sixth Annual Shadow Banking Survey

Sector Remains Robust and Growing Despite New Regulation

Author: David Schwartz

The Financial Stability Board’s (FSB) sixth annual shadow banking survey found that the shadow banking market remains robust and growing, equivalent to 13 percent of total financial system assets and 70 percent of the GDP of 28 covered jurisdictions. The report published May 10, 2017  presents the results of the FSB’s annual monitoring exercise to assess global trends and risks in the shadow banking system, reflecting data up to the end of 2015. It covers 28 jurisdictions, adding Belgium and the Cayman Islands for the first time. Notably, however, China failed to provide data for this latest report.[1] 

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Sunday, November 27, 2016

FSB Announces Priorities for 2017

Shadow Banking, G-SIFIs, and Asset Management are among FSB's 2017 priorities.

Author: David Schwartz

At its November 17, 2016 plenary session in London, the Financial Stability Board (FSB) met to discuss current vulnerabilities and agree on priorities for 2017.  While noting that the global financial system is more resilient as a result of the regulatory reforms introduced following the 2008 financial crisis, the FSB is keeping a close eye on areas of concern like high sovereign and corporate debt, asset quality and profitability issues faced by banks, and unfinished balance sheet repair in some parts of the financial system.  With these and other potential vulnerabilities in mind, the FSB has assembled a list of the areas upon which they plan to focus their attention in the upcoming year.

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Tuesday, July 12, 2016

The New Shape of Shadow Banking Regulation

Runnable Funding Takes Center Stage in Policy and Analysis

Author: David Schwartz

In a July 12, 2016 address at the Center for American Progress and Americans for Financial Reform Conference, Washington, DC, Federal Reserve Board Governor Daniel K. Tarullo provided some insights in to the Fed and FSOC’s current thinking on regulation of shadow banking.  

 

Shadow banking is an imprecise term, so Tarullo counsels turning away from definitional questions and efforts to create a shadow banking taxonomy in favor of a greater focus on characteristics of shadow banking-related financial activities and institutions that are most likely to pose risks to financial stability.   According to Tarullo, the financial crisis began as a run on short-term liabilities by investor who had come to doubt the value of the assets they were funding through various kinds of financial intermediaries. Because these kinds of runs and panics are characteristic of every financial crisis, Tarullo suggests focusing analysis and policy initiatives with regard to the universe of shadow banking activities on the presence of runnable funding.  

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Sunday, June 26, 2016

FSB Publishes Policy Framework for “Vulnerable” Asset Management Activities

Urges Better Data on Securities Lending Indemnities

Author: David Schwartz

On June 22, 2016, the Financial Stability Board (FSB) published a consultation paper proposing a framework to address four areas it sees as structural vulnerabilities from asset management activities that could potentially present financial stability risks.  The consultation, Proposed Policy Recommendations to Address Structural Vulnerabilities from Asset Management Activities, proposes 14 policy recommendations to address four categories of structural vulnerabilities:

 

  1. liquidity mismatch between fund investments and redemption terms and conditions for fund units;
  2. leverage within investment funds;
  3. operational risk and challenges in transferring investment mandates in stressed conditions; and
  4. securities lending activities of asset managers and funds.
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Thursday, May 26, 2016

FSB Review Concludes that Taming of Shadow Banking is Far From Complete

Encourages Member States to Continue Their Efforts

Author: David Schwartz

According to a peer review published the by Financial Stability Board (FSB) on May 25, 2016, regulation of shadow banking remains at an early stage, and much progress remains to be made. According to the report, notwithstanding the progress made, “more work is needed to ensure that jurisdictions can comprehensively assess and respond to potential shadow banking risks posed by non-bank financial entities, and support FSB risk assessments and policy discussion.”

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