Non-bank financial institution

Financial markets - intermediation - regulation.

(NBFI).

A non-bank financial institution is an organisation such as a pension fund that engages in certain important activities that are similar to banks, but is not regulated as a bank.

NBFIs pose multiple systemic risks

"The NBFI sector comprises a vast set of financial intermediaries that are not banks, central banks, or public financial institutions.

NBFIs are a heterogeneous group of institutions including insurers, pension funds, various types of investment funds, finance companies, broker-dealers, and central counterparties (CCPs).

While sometimes engaging in activities similar to banks, NBFIs are not deposit takers and are thus not subject to similar regulation or supervision as banks.

Accordingly, NBFIs generally also do not have access to central bank backstops.

Given the different business models of various NBFIs, they pose different kinds of systemic risk.

The Financial Stability Board (FSB), for instance, identifies a subset of NBFIs (called the “narrow measure”) that the authorities have assessed to be involved in credit intermediation activities – i.e., maturity/liquidity transformation, leverage or imperfect credit risk transfer, and/or regulatory arbitrage – and may pose bank-like financial stability risks."

Putting Out the NBFire: Lessons from the UK’s Liability-Driven Investment (LDI) Crisis - IMF working paper - Prepared by Ruo Chen and Esti Kemp - September 2023.

See also

• Bank
• Central bank
• Central counterparty (CCP)
• Contagion
• eurozone crisis
• Financial stability
• Financial Stability Board (FSB)
• Global Financial Crisis
• Intermediary
• International Monetary Fund (IMF)
• Investment fund
• Leverage
• Liability driven investment (LDI)
• Pension fund
• Recapitalise
• Supervision
• Systemic risk
• UK LDI crisis

Other resource

• Putting Out the NBFire: Lessons from the UK’s Liability-Driven Investment (LDI) Crisis - IMF working paper - Prepared by Ruo Chen and Esti Kemp - September 2023