On 2 July 2015, the Financial Stability Board (FSB) published a press release announcing the launch of a peer review on the implementation of its policy framework for financial stability risks posed by non-bank financial entities other than money market funds. Transforming shadow banking into resilient market-based finance is one of the core elements of the FSB‘s regulatory reform agenda. The framework was developed by the FSB in August 2013 and focuses on the underlying economic functions of non-bank financial entities. The objective of the review is to evaluate the progress made by FSB jurisdictions in implementing the overarching principles set out in the framework, i.e. that FSB jurisdictions should assess shadow banking entities based on economic functions; adopt policy tools to mitigate identified financial stability risks caused by shadow banking entities; and participate in information sharing through the FSB.
The peer review will consider:
- arrangements needed to update the regulatory framework in order to capture new forms of shadow banking;
- types of information necessary to assess shadow banking risks for entities that have the potential to pose risks to the financial system;
- how to enhance public disclosure of shadow banking entities’ risks; and
- the design of policy tools to mitigate identified financial stability risks.
The FSB initially invited feedback from financial institutions, industry, consumer associations and other stakeholders on the areas covered by the review (the consultation period has now closed). The FSB will analyse and discuss the responses later in 2015 and the peer review will be published in early 2016.