Basel endgame heightens shadow-banking fears
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BANKING

Basel endgame heightens shadow-banking fears

Global financial regulators are right to pay more attention to non-bank risks, John Schindler, secretary general of the Financial Stability Board tells Euromoney. But is there a danger of losing sight of the most important piece of the system to preserve: the banks?

the shadow of a man
Photo: iStock

Regulators have been talking about increasing their scrutiny of shadow banking for at least a decade. Now, as higher interest rates spark volatility in bonds, real estate and other asset classes, there is a renewed regulatory push to address systemic vulnerabilities in the non-bank financial sector, important parts of which remain almost entirely unregulated.

The collapse of Silicon Valley Bank this year graphically demonstrated the dangers of inadequate bank regulation, especially in the US. And as banks worldwide prepare for the finalization of Basel III – often called the Basel endgame or Basel IV – there is concern that even more risk will flow into the non-bank sector. This includes hedge funds, private equity and family offices, as well as tighter-regulated businesses such as money market funds, insurance companies and pension funds. Private credit, for example, has grown rapidly.

Reinforced growth

Set up in the wake of the 2008 crisis largely to bolster global regulation of banks, the G20’s Financial Stability Board (FSB) is central to international efforts to get a better handle on risks in and outside the banking sector.

Speaking

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