Since the global financial crisis of 2008-9, traditional banks have retreated from general trading in general and investing in private assets.
Largely conditioned by the changing regulatory environment post-2008, this has led to a rapid increase in the market share of shadow banks. Comprising non-bank financial institutions (NBFIs) such as hedge funds, private equity houses, and other entities outside the traditional banking sector, last December the Financial Stability Board estimated that NBFIs held $239 trillion in assets. Nearly 50% of total financial sector assets.
The rapid growth in NBFI assets, combined with their lack of transparency, presents major challenges to policy makers and businesses alike. The SVB and Credit Suisse crises earlier this year showed even fully regulated institutions are vulnerable to the rapid rise in interest rates being pursued by central banks to control inflation. So how vulnerable are institutions which are not currently regulated?
Please join us for this discussion looking at the following key questions:
What effect have higher interest rates had on NBFIs so far and what may come in the future?
What other risks does the sector face, e.g. from rising geopolitical tensions, rapid technology change or climate change?
How far are financial regulators – and other entities that safeguard the financial system (central banks, accountants, credit agencies etc) on top of the problem? What more do they need to do?