Non-bank financial intermediaries

Financial services regulation - supervision - risk - financial stability.

(NBFI).

Non-bank financial intermediaries are entities that provide credit intermediation fully or partially outside the conventional banking system.

Non-bank financial intermediaries include investment funds, pension funds, insurance companies, broker-dealers, hedge funds and structured finance vehicles.

Non-bank financial intermediaries are also known as "non-bank financial institutions", "other financial intermediaries" (OFIs) or - historically - "shadow banks".

Financial Stability Board (FSB) - systemic risks from non-bank financial intermediation

"Non-bank financial institutions... have different business models, balance sheets and governance structures, and are subject to distinct regulatory frameworks within and across jurisdictions.

[They] play an increasingly important role in financing the real economy and in managing the savings of households and corporates. They are a valuable alternative to bank financing and help to support real economic activity.

Nevertheless, non-bank financing may become a source of systemic risk if it involves maturity/liquidity transformation or leads to the build-up of leverage.

The diversity and growing involvement of non-bank entities in credit provision has led to more interconnections, including on a cross-border basis, meaning that stress in the sector can be transmitted more widely to other parts of the financial system and to the broader economy.

... the FSB has been coordinating and contributing to the development of policies to mitigate potential systemic risks associated with NBFI."

Non-Bank Financial Intermediation - Financial Stability Board (FSB).

Linkages with the NBFI sector expose banks to liquidity, market and credit risks

"Banks are connected to non-bank financial intermediation (NBFI) sector entities via loans, securities and derivatives exposures, as well as funding dependencies.

Linkages with the NBFI sector expose banks to liquidity, market and credit risks. Funding from NBFI entities would appear to be the most likely and strongest spillover channel, given that NBFI entities maintain their liquidity buffers primarily as deposits and very short-term repo transactions with banks.

At the same time, direct credit exposures are smaller and are often related to NBFI entities associated with banking groups.

Links with NBFI entities are highly concentrated in a small group of systemically important banks, whose sizeable capital and liquidity buffers are essential to mitigate spillover risks."

Key linkages between banks and the non-bank financial sector - European Central Bank (ECB) - May 2023.

See also

• Australian Financial Regulation
• Balance sheet
• Bank
• Bank of England
• Bank supervision
• Broker-dealer
• Business model
• Capital adequacy
• Capital buffer
• Compliance
• Credit
• Credit risk
• Deposit
• Derivative instrument
• Directive
• Enforcement
• Ethics
• European Banking Authority (EBA)
• European Central Bank (ECB)
• Exposure
• Federal Reserve System
• Financial Conduct Authority (FCA)
• Financial intermediary
• Financial Services Authority (FSA)
• Financial stability
• Financial Stability Board (FSB)
• Good practice
• Governance
• Guidance
• Hedge fund
• Insurance company
• Intermediation
• Investment firm
• Investment fund
• Jurisdiction
• Law
• Legislation
• Leverage
• Liquidity
• Liquidity buffer
• Liquidity risk
• Liquidity transformation
• Market risk
• Maturity transformation
• Monetary financial institution
• Pension fund
• Prudential
• Prudential Regulation Authority
• Real economy
• Red tape
• Regime
• Regulation
• Repo
• Reporting
• Reputational risk
• Rules
• Security
• Solvency II
• Spillover risk
• Standards
• Stress
• Structured finance
• Supervisor
• Systemic risk
• Systemically Important Bank (SIB)

Other resources

• Non-Bank Financial Intermediation - Financial Stability Board (FSB)

• Key linkages between banks and the non-bank financial sector - European Central Bank (ECB) - May 2023