The NBB and the FSMA published a joint updated study on asset management and shadow banking in Belgium on 25 October 2018, which represented an amount of EUR 147 billion at the end of 2017. The first joint report on this topic was dated 3 October 2017.
The report addresses the trend towards a more market-based financial system, where financial intermediation also takes place outside the banking sector.
According to this report, the term “shadow banking” should in fact be replaced by the more appropriate term “non-bank financial intermediation,” which can take many forms and support the economy by offering an alternative to bank borrowing. These assets mainly consist of money market funds and non-equity investment funds.
It is generally admitted that non-bank financial intermediation can rise to systemic risks threatening the stability of the financial system. However, the report confirms that, at this stage, no substantial systemic risks have been identified in relation to asset management and non-bank financial intermediation. Developments in both areas and links with other sectors of the economy do, however, require careful monitoring.
The so-called “step-in” risk is that groups selling investment funds may de facto feel (voluntarily) obliged to compensate clients for the risks associated with such investment funds, even if they are not contractually bound to do so.
The regulators underline the importance of collecting data on asset management and non-bank financial intermediation. The FSMA has adjusted and expanded the statistical information to be submitted by investment funds. A Belgian royal decree providing investment funds with specific tools in case of liquidity problems should be published within the next few weeks.
Read: The FSMA’s press release