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NBFI risks: are further measures needed? (liquidity / leverage risks, liquidity supply…)

NBFI risks: are further measures needed? (liquidity / leverage risks, liquidity supply…)

Day 3 Morning

Friday 23 February

Room :

ROOM 1

Speakers

Chair
Francesco Mazzaferro
Director General of Secretariat - European Systemic Risk Board (ESRB)
Public Authorities
Gerry Cross
Director Financial Regulation, Policy and Risk - Central Bank of Ireland
Lee Fougler
Director, Financial Stability Strategy and Risk - Bank of England
Ulf Lewrick
Principal Economist - Bank for International Settlements (BIS)
Romain Paserot
Deputy Secretary General - International Association of Insurance Supervisors (IAIS)
László Vastag
Executive Director Prudential and Consumer Protection Supervision of Money Market Institutions - Central Bank of Hungary
Industry Representatives
Ana Arsov
Global Co-Head of Financial Institutions and Global Head of Private Credit - Moody's Investors Service
John Golden
Executive Vice President, Global Head of Insurance Regulation - Athene

Objectives

Non-bank financial intermediation (NBFI) comprises investment funds, insurance companies, pension funds and other financial intermediaries. The NBFI sector has grown to almost half of global financial assets, worth around $218tn in 2023, and has become more diverse . As a result, the importance of NBFI for the financing of the real economy has increased.

Within the euro area, the growth of NBFI sector accelerated after the global financial crisis, doubling from €15 trillion in 2008 to € 31 trillion nowadays . The share of credit granted by NBFIs to euro area non-financial corporates increased from 15% in 2008 to 26% at the end of 2022.

The session will discuss whether both regulators and financial market participants have the required data and the understanding of how a shock to “shadow banking” would affect the financial system as a whole and how to move forward on these assessments. Then the panel will focus on the main risks that stem from NBFI and assess if they are appropriately addressed in Europe in particular. The session will discuss horizontally risks specific to asset management (including when performed by the insurance and pension fund sector).

Points of discussion

  1. Non-bank financial intermediation (NBFI) comprises investment funds, insurance companies, pension funds and other financial intermediaries. The NBFI sector has grown to almost half of global financial assets, worth around $218tn in 2023, and has become more diverse . As a result, the importance of NBFI for the financing of the real economy has increased.Within the euro area, the growth of NBFI sector accelerated after the global financial crisis, doubling from €15 trillion in 2008 to € 31 trillion nowadays . The share of credit granted by NBFIs to euro area non-financial corporates increased from 15% in 2008 to 26% at the end of 2022.

    The session will discuss whether both regulators and financial market participants have the required data and the understanding of how a shock to “shadow banking” would affect the financial system as a whole and how to move forward on these assessments. Then the panel will focus on the main risks that stem from NBFI and assess if they are appropriately addressed in Europe in particular. The session will discuss horizontally risks specific to asset management (including when performed by the insurance and pension fund sector).

  2. What are the main risks that stem from the Non-Bank Financial Intermediation in Europe in the current macroeconomic context of high interest rates and weak growth? Are these specific NBFI risks threatening the stability of the financial sector as a whole? What are the main domestic and cross-border linkages between the banking and NBFI sectors, through which such risks would be transmitted?