Summary of document history
The proposed policy recommendations aim to enhance the ability of authorities and market participants to monitor vulnerabilities from NBFI leverage, contain NBFI leverage where it may create risks to financial stability, and mitigate the impact of these risks.
This report focuses on policy measures to address leverage in non-bank financial intermediation (NBFI) where it can create financial stability risks.
Leverage is a financial technique used to increase exposures, boost returns or take positions that can offset potential losses from other exposures (hedging).
In 2023, the FSB published a report on The Financial Stability Implications of Leverage in Non-Bank Financial Intermediation, which discussed the vulnerabilities associated with NBFI leverage. That report found that NBFI leverage played a significant role in recent episodes of market stress, such as the March 2020 market turmoil, the default of Archegos in March 2021, the commodities market turmoil in 2022, and the Liability-Driven Investment (LDI) crisis that amplified stress in the UK Gilt market in September 2022.
Our proposed policy recommendations seek to address financial stability risks arising from leverage in NBFI, through improved risk identification and monitoring, a combination of policy measures, and enhanced cross-border collaboration.
The FSB is inviting comments on its consultation report and the questions set out below. Responses will be published on the FSB’s website unless respondents expressly request otherwise on the online form.
Responses should be submitted via this secure online form by 28 February 2025.
Please contact the FSB by email ([email protected]) if you have questions or if you wish to provide supplementary material.