Impact of Non-Bank Financial Intermediation on Banking Crises

Abstract

The article is devoted to the study of trends in the development of non-bank financial intermediation. The scale of the non-banking segment of the financial market has increased significantly, and it is believed that at the beginning of 2022 it accounted for about half of global financial assets, which may affect the financial stability not only of individual states, but also of the entire global economy. In this regard, the analysis of risks emanating from non-bank financial intermediation institutions is an urgent task of national financial regulatory authorities. The present study is aimed at solving this problem. The purpose of the study is to identify the impact of non-bank financial intermediation on the banking sector in order to determine the prospects for its anti-crisis regulation and develop approaches to the formation of strategies for managing systemic risks that may be caused by the activities of such institutions. The study is based on data from the Financial Stability Board, the International Monetary Fund, and the Bank of Russia. Methods of analyzing regulatory documents and comparative economic analysis are used. The paper systematizes possible channels for the implementation of risk factors and develops new approaches for the diagnosis of systemic risks due to the influence of non-bank financial institutions. There are suggestions made regarding the formulation of systemic strategies for risk management: strengthen regulation and supervision of NBFP institutions; provide conditions for providing liquidity in case of stress in the NBFP sector; ensure coordination between the Central Bank and sectoral regulators in order to manage crisis situations. Possible tools for setting up macroprudential policy to control risk factors of certain groups of non-banking financial institutions in order to ensure the stability of financial markets are presented: limitations of interrelationships with the banking system; indicators of sensitivity to customer panics; improving the quality of risk assessment; prohibition of secondary and tertiary securitizations of assets. It is concluded that there is a need for national authorities to apply 4 main approaches to regulation, primarily aimed at reducing liquidity risks, financial leverage, currency gaps and interconnectedness.

Keywords

• financial system
• non-bank financial companies
• financial stability
• digital technologies
• systemic risk
• regulation and supervision
• banking crises
• macroprudential policy