The Global Financial Markets Association (GFMA), which represents the leading global financial and capital market participants, welcomes the opportunity to respond to the consultation by the Financial Stability Board (“FSB”) on leverage in Non-Bank Financial Intermediation (NBFI).
GFMA is supportive of the efforts by the FSB to enhance the ability of authorities and market participants to identify, monitor and contain financial stability risks associated with non-bank financial intermediation.
GFMA believes macro-level risk monitoring, aligned to the Bank of England’s system-wide exploratory scenario (SWES) is an important complement to risk management conducted by firms. GFMA fully supports authorities having access to appropriate and sufficient information in order to identify and monitor risks related to NBFI leverage; where information gaps are identified in authorities’ capabilities to monitor these macro risks, NBFI firms should provide the necessary information. Banks already face comprehensive risk management frameworks, with new CCR guidelines due to be implemented at national level. Where authorities believe gaps still remain in terms of the data banks receive from NBFI counterparties, focus should fall on NBFI’s disclosure, rather than placing additional requirements on banks.
Caroline Liesegang, Managing Director, Head of Capital & Risk Management, Sustainable Finance and Research at AFME, said: “We welcome the FSB’s efforts to ensure financial stability across the financial ecosystem. NBFIs are a diverse set of market participants, with different business models and very different risk profiles. Measures that may be appropriate for some NBFIs would not be appropriate for others. In some cases, NBFIs are already subject to comprehensive regulation in certain jurisdictions. Rather than reopening that regulatory framework, the FSB should focus on international consistency of existing frameworks.”
“Furthermore, we encourage the FSB to clearly define the scope of firms intended to be captured under its proposals, with care taken to exclude firms which do not use leverage, such as money market funds, investment funds and leveraged pension funds. However, regulatory treatment of Non-Bank Market Makers should reflect their growing position within markets and increased contribution to systemic risk. We would note the role of market-making as an economic function of critical importance with an impact on the real economy. We look forward to continuing engagement with the FSB and other supervisory bodies as efforts to further bolster financial stability evolve”.
– 28 February 2025 –
