The Financial Stability Board has published a consultation report on policy measures to address leverage in non-bank financial intermediation where it can create financial stability risks. The measures aim to help 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.
The nine policy recommendations cover: (i) risk identification and monitoring; (ii) addressing data challenges; (iii) public disclosures; (iv) addressing NBFI leverage in core financial markets; (v) using a wide range of measures to address such financial stability risk; (vi) counterparty credit risk management; (vii) the adequacy of private disclosure practices between leveraged non-bank financial entities and leverage providers; (viii) addressing incongruences in the regulatory treatment of NBFI leverage by adopting the principle of "same risk, same regulatory treatment"; and (ix) enhancing cross-border cooperation and coordination.
The FSB notes that market structures, legal frameworks, and financial stability risks related to leverage vary across jurisdictions and so a combination of policy measures may be most effective. The deadline for comments is February 28, 2025. The final report will be published in mid-2025.
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