The comprehensive monitoring of global trends, vulnerabilities, and innovations of the non-bank financial intermediation (NBFI) sector is a key part of the FSB’s ongoing efforts to enhance financial system resilience.This report describes broad trends in financial intermediation across 29 jurisdictions that account for around 88% of global GDP, before narrowing its focus to the subset of NBFI activities that may be more likely to give rise to vulnerabilities.
In 2023, the size of the NBFI sector increased 8.5%, more than double the pace of banking sector growth (3.3%), raising the NBFI share of total global financial assets to 49.1%. The growth of the NBFI sector was largely attributed to higher valuations for mark-to-market instruments, which rebounded after a significant decrease in 2022. Investor inflows to NBFI entities also contributed to the increase.
All NBFI subsectors grew at rates around two times their five-year average in 2023. The assets of almost all entity types increased, with investment funds continuing to drive changes in the asset levels of the NBFI sector. Money market fund (MMF) assets grew in the majority of reporting jurisdictions, driven primarily by increased flows as a result of higher MMF yields relative to bank deposits as well as, in part, by the March 2023 banking turmoil in the United States and Switzerland.
The financial assets of entities classified in the FSB’s narrow measure – the subset of NBFI engaging in credit intermediation and that may give rise to financial stability risks – increased 9.8% to reach $70.2 trillion, the highest level ever recorded in this exercise. The narrow measure reflects an activity-based “economic function” (EF) assessment of risks.
Financial institutions’ borrowings continued to increase in 2023, despite the higher interest rate environment. Borrowings from the NBFI sector increased at a slightly faster pace than that of banks (4.1% compared to 3.4%, respectively). Captive financial institutions and broker-dealers were the entity types among the NBFI sector with the largest amount of total borrowings, both at around $6.3 trillion. Real estate investment trusts (REITs), finance companies, broker-dealers, and structured finance vehicles were the entity types with the largest levels of financial leverage.
Most NBFI vulnerability metrics remained stable over the past year, with fixed income and mixed funds showing high degrees of liquidity transformation, while finance companies, broker-dealers and SFVs displayed relatively high levels of leverage. To complement the monitoring of vulnerabilities, jurisdictions also provided information on the availability of policy tools for lending activities dependent on short-term funding (predominantly finance companies), and intermediation activities dependent on short-term funding (primarily broker-dealers), detailed in Box 3-1 of the report.
The report also includes, for the first time, data on non-bank fintech lending from some of the participating jurisdictions on a best-efforts basis. This addresses part of the third phase of the G20 Data Gaps Initiative, which includes a recommendation to close data gaps related to non-bank fintech lending.
Datasets from the report are publicly available for use in accordance with the FSB’s normal terms and conditions.