FSB Proposes Recommendations for Non-Bank Financial Intermediaries

ZURICH (Reuters) – The Financial Stability Board (FSB) on Wednesday pitched recommendations for governments to reduce risks around hedge funds, insurers, and other non-bank financial intermediaries, which now account for almost half of global financial assets.

The sector of non-bank financial intermediation has grown by around 130% between 2009 and 2023, making markets more vulnerable to stress events, according to the Basel-based FSB, which acts as the G20's financial risk watchdog.

> "This growth comes with an increase in complexity and interconnectedness in the financial system, which, if not properly managed, can pose substantial risks to financial stability," said FSB Secretary General John Schindler.

In its consultation report, the FSB proposed member governments and institutions enhance their focus on non-banks and ensure they manage their credit risks adequately.

Key Recommendations

1. Create Domestic Frameworks: Develop frameworks to identify and monitor financial stability risks related to non-bank leverage.
2. Policy Measures: Select, design, and calibrate policy measures by governments to mitigate the identified financial stability risks.
3. Counterparty Credit Risk Management: Implement the Basel Committee on Banking Supervision's revised guidelines thoroughly and in a timely manner.
4. Private Disclosure Practices: Enhance private disclosure practices in the non-bank sector.
5. Same Risk, Same Regulatory Treatment: Address regulatory inconsistencies by adopting this principle.
6. Cross-Border Cooperation: Improve cross-border cooperation and collaboration.

With the consultation report, the FSB is inviting comments from member governments and institutions on its policy recommendations. A final report is planned for release in mid-2025.