FSB Publishes Initial Integrated Set of Recommendations to Strengthen Oversight and Regulation of Shadow Banking
The Financial Stability Board (FSB) has publishing for public consultation an initial integrated set of policy recommendations to strengthen oversight and regulation of the shadow banking system. The FSB has focused on five specific areas in which the FSB believes policies are needed to mitigate the potential systemic risks associated with shadow banking:
(i) to mitigate the spill-over effect between the regular banking system and the shadow banking system;
(ii) to reduce the susceptibility of money market funds (MMFs) to “runs”;
(iii) to assess and mitigate systemic risks posed by other shadow banking entities;
(iv) to assess and align the incentives associated with securitisation; and
(v) 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”.
The consultative documents published comprise:
• a report entitled An Integrated Overview of Policy Recommendations which sets out the FSB’s overall approach to shadow banking issues and provides an overview of its
recommendations across the five specific areas;
• a report entitled Policy Framework for Strengthening Oversight and Regulation of Shadow Banking Entities which sets out a high-level policy framework to assess and
mitigate bank-like systemic risks posed by shadow banking entities other than MMFs (other shadow banking entities) – (iii) above; and
• a report entitled Policy Recommendations to Address Shadow Banking Risks in Securities Lending and Repos that sets out 13 recommendations to enhance transparency, strengthen regulation of securities financing transactions, and improve market structure – (v) above.
The FSB is also publishing its second annual Global Shadow Banking Monitoring Report.
Originally Published:
18/11/2012