FSB Progress Report on strengthening Oversight and Regulation of Non-Bank Financial Intermediation (NBFI)

In 2013, the Financial Stability Board (FSB) collaborated with standard-setting bodies to create a framework and policy toolkit endorsed by the G20 for strengthening non-bank entity oversight and regulation.

The Financial Stability Board (FSB) has issued a report outlining progress in implementing reforms to reduce spillovers between banks and the NBFI sector, reduce the susceptibility of money market funds (MMFs) to runs, align incentives associated with securitization, and mitigate systemic risks posed by other non-bank entities and activities.

Jurisdictions have made progress in implementing Basel III reforms to reduce spillovers between banks and non-bank financial entities, according to the FSB, but implementation is not yet complete.

The largest MMF markets are the most advanced in adopting the 2012 International Organization of Securities Commissions (IOSCO) recommendations to reduce the run risk of money market funds (MMFs).

The IOSCO recommendations on incentive alignment approaches for securitization, as well as the Basel Committee on Banking Supervision standard on the revised securitization framework, are currently being implemented.

In most jurisdictions, implementation of FSB recommendations for mitigating procyclicality and other financial stability risks associated with SFTs is still incomplete and faces significant delays.

The majority of FSB recommendations to assess and mitigate systemic risks posed by other non-bank financial entities and activities are still being implemented.

In addition to these reforms, the FSB is conducting additional analytical and policy work to strengthen the NBFI sector’s resilience, building on the lessons learned from the March 2020 market turmoil. Future versions of this report will include updates on the implementation of new agreed-upon NBFI policies.

Galactik Views

Related articles