The Financial Stability Board has published an initial integrated set of recommendations to strengthen oversight and regulation of shadow banking.

The “shadow banking system” can broadly be described as “credit intermediation involving entities and activities (fully or partially) outside the regular banking system” or non-bank credit intermediation in short.

The publications consist of:

  1. 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;
  2. 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); and
  3. 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.

The FSB welcomes comments on these documents and all comments should be submitted by 14 January 2013.

The FSB has also issued its second annual Global Shadow Banking Monitoring Report 2012.

The main findings in this report are as follows:

  • Non-bank financial intermediation grew rapidly before the crisis (in parallel with the regular banking system), from an estimated $26 trillion in 2002 to $62 trillion in 2007. It has continued to increase since, although at a slower pace.
  • There is considerable diversity in the relative size, composition and growth of the non-bank financial intermediaries across jurisdictions.
  • Data granularity is improving, with the share of unidentified non-bank financial intermediaries within overall non-bank intermediation falling from 36% in 2010 to 18% in 2011.

The FSB has reported that it plans to complement the monitoring exercise next year by obtaining more granular data on assets and liabilities as well as expanding activity-based and risk-based monitoring.