Basel Committee: non-bank financial intermediary (NBFI) sector continues to grow and has the potential to cause financial stability concerns

Newsletter on bank exposures to non-bank financial intermediaries
Basel Committee on Banking Supervision, 24 November 2022

Recent episodes of distress highlighted vulnerabilities and deficiencies in some banks’ risk management practices related to NBFIs. Supervisors consider exposures to highly leveraged counterparties via derivatives and securities financing to be the riskiest. Supervisors are observing similar deficiencies in some banks’ management of commodity-related counterparties.

Supervisors will continue to monitor exposures, focus on the proper application of existing standards and guidance, and assess the level of observable data to improve the visibility of interconnections between banks and NBFIs.

The Committee strongly encourages the proper application of existing standards and guidelines, as well as the full and timely implementation of the Basel III standards. It is committed to continuing to exchange supervisory views on banks’ exposures to NBFIs including on recent episodes highlighting leverage, concentration and liquidity concerns in the non-bank sector and related supervisory practices. In addition, the Committee continues to contribute to the Financial Stability Board’s work on assessing and addressing the risk from NBFIs.

The full newsletter is available at https://www.bis.org/publ/bcbs_nl31.htm

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