FSB Publishes Initial Recommendations to Strengthen Oversight and Regulation of Shadow Banking

The Financial Stability Board (FSB) is publishing for public consultation an initial integrated set of policy recommendations to strengthen oversight and regulation of the shadow banking system.  The shadow banking system is “credit intermediation involving entities and activities (fully or partially) outside the regular banking system” or non-bank credit intermediation, according to FSB. FSB focuses on five specific areas in which the FSB believes policies are need to mitigate the potential systemic risks associated with shadow banking:

  1. to mitigate the spill-over effect between the regular banking system and the shadow banking system;
  2. to reduce the susceptibility of money market funds (MMFS) to “runs”;
  3. to assess and mitigate systemic risks posed by other shadow banking entities;
  4. to assess and align the incentives associated with securitisation;
  5. to dampen risks and pro-cyclical incentives associated with secured financing contracts such as repos, and securities lending that may exacerbate funding strains in times of “runs”

View press release in full here (links externally to FSB website).