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Non-bank financial intermediation is increasingly crucial for EU credit and financial markets, with 2023 marking renewed growth, but it also presents stability risks, especially through leverage, liquidity mismatches, and interconnectedness; Richard Portes reviews these structural risks, explores developments in private finance and crypto, and emphasizes the need for a holistic view in EU regulatory discussions on non-bank finance.

Image courtesy of interviewee. October 31, 2024

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This video discusses the roles and risks associated with banks and non-bank financial intermediaries in the financial system. Banks hold deposit liabilities, make loans, and must adhere to regulatory minimum equity capital. In contrast, many non-bank financial intermediaries, like asset managers, don't have significant balance sheets and are primarily channels for investor funds into various assets. The risks for these assets fall on the investors, not the intermediaries, which often face little regulation and no central bank support during crises.

Key examples of failures, such as the 2008 crisis involving AIG and the recent collapse of the family office Argos, highlight the potential systemic risks these intermediaries pose, particularly through interconnectedness with banks. This video emphasizes that although non-bank entities can diversify risks and channel savings into investments, they can increase systemic debt and liquidity risks.

Specific concerns include the increasing relevance of crypto assets, with both banks and non-bank intermediaries exposed to the volatile crypto market. Moreover, the limited regulation around money market funds and private credit, which has grown significantly, raises alarms among financial authorities. The evolving relationships between banks and non-bank financial actors necessitate better monitoring and regulation to prevent potential adverse effects on financial stability. This video concludes that non-bank financial intermediation has become a critical area of concern for policymakers globally.

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Here are five key points summarizing the video regarding the risks and regulatory challenges associated with non-bank financial intermediaries:

1. **Regulatory Gaps and Risks**: Non-bank financial intermediaries (NBFIs), unlike banks, generally face little to no regulation, exposing the financial system to significant risks, such as liquidity risks, leverage, and poor oversight of interconnectedness with the banking sector. The lack of backstop mechanisms (like central bank support) increases the potential for failure and broader financial instability.

2. **Impact of the 2008 Financial Crisis**: The video refers to the impact of the 2008 financial crisis—specifically the failure of major companies like AIG and the knock-on effects that contributed to the downfall of banking institutions like Credit Suisse. These events underline the interconnectedness between banks and NBFIs, highlighting how risks can propagate across the financial system.

3. **Liquidity Risks from Investment Products**: Specific examples of liquidity risks are , such as open-ended real estate funds and money market funds, which can face runs when investors seek to withdraw their funds. These scenarios may force funds to impose restrictions (gates) or liquidate assets, thereby affecting market stability.

4. **Interconnectedness of Crypto and Banking Sectors**: The growth of the crypto sector and the issuance of crypto products by asset managers raise concerns about their impact on traditional banks. Events like the failure of Silicon Valley Bank are tied to significant exposure to crypto, demonstrating the risks present when traditional finance intersects with high-risk assets.

5. **Growing Role of Private Credit and Lack of Oversight**: The expansion of private credit, which is increasingly used by non-bank lenders to provide loans to riskier firms, has raised alarms regarding inadequate due diligence compared to traditional banking practices. This shift, along with the growth of the asset management sector independent of banks, poses risks to financial stability, especially in the convideo of insufficient regulatory frameworks to address these evolving dynamics.

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Here are key quotes extracted from the video that highlight the main themes and points discussed:

1. **On the nature of financial intermediaries:**
- "Banks have deposit liabilities and assets in the form of loans and an equity capital base that's quite subject to regulatory minimum."
- "Most non-bank financial intermediaries... don't have significant balance sheets."

2. **On risks and regulation:**
- "The risks associated with those assets are born by the non-bank financial intermediaries."
- "The non-bank financial intermediaries are subject to little or no regulation, and they have no backstops... and they can fail."
- "They can pose liquidity risks... we've seen... the liquidity risks posed by open-ended real estate funds."

3. **On historical examples of risk:**
- "A big example, of course, was AIG, the big insurer in the crisis of 2008, which was one of the biggest bailouts ever."
- "The banks didn't know... what AIG was borrowing from the others... and that contributed to the downfall of Credit Suisse in March 2023."

4. **On the role of central banks:**
- "The central banks may be forced to intervene as market makers of last resort."
- "The problem with the non-bank financial intermediaries from the point of view of the authorities is that they're not really very much regulated."

5. **On interconnectedness:**
- "We are concerned that crypto market disturbances could spread to traditional finance, in particular the banks."
- "There are rising valuations... and we had this growth of private credit... which is a rapidly growing sector."

6. **On private credit and the risk profiles:**
- "Private credit is now probably over 3 trillion in Europe... and that's a non-trivial number."
- "The borrowers ultimately can handle that burden... and poses risks to the non-bank financial intermediation system."

7. **On regulatory challenges:**
- "We maintain that that regulation is insufficient... we have proposed that the European Systemic Risk Board... a number of what we think are important."
- "There are issues that were supposedly dealt with in the European Union by a regulation in 2017... that worries us."

8. **On the growing concern of non-bank financial intermediation:**
- "The authorities are more concerned now with non-Bank financial intermediation than they used to be."
- "Non-Bank financial intermediation has... certainly top of the list for policy makers."

These quotes encapsulate the essence of the discussion on the risks posed by non-bank financial intermediaries, their lack of regulation, the historical convideo of failures, and the interconnectedness with traditional banks and financial systems.

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Here are some articles that discuss topics related to your video, including non-bank financial intermediaries, their regulation, risks in the financial system, and the interconnectedness with traditional banking:

1. **"The Rise of Non-Bank Financial Intermediation: Implications for Financial Stability"** – This article explores the growing role of non-bank financial entities in the economy, their lack of regulatory oversight compared to banks, and the potential risks they pose to financial stability.

2. **"Understanding the Risks Posed by Shadow Banking"** – This piece examines the shadow banking system and the unique risks it creates, particularly how it can impact traditional banking institutions during financial disruptions.

3. **"Liquidity Risks in Non-Bank Financial Intermediaries"** – The article focuses on liquidity management challenges faced by non-bank financial entities, especially during periods of financial stress, and draws parallels with events in the 2008 financial crisis.

4. **"Crypto Assets and Financial Stability: Regulatory Considerations"** – This article assesses the trajectory of crypto assets and their integration into traditional finance, highlighting regulatory responses and the stability risks associated with this new asset class.

5. **"Risk and Regulation of Money Market Funds: Lessons from Recent Crises"** – This article delves into the regulation of money market funds, analyzing past events where these funds faced significant liquidity challenges and the framework for ensuring their stability.

6. **"The Interconnectedness of Banks and Non-Bank Financial Institutions"** – This analysis discusses how banks and non-bank financial intermediaries are linked through complex financial relationships, emphasizing the potential systemic risks that arise from these connections.

7. **"Private Credit Markets: Growth, Risks, and Regulatory Outlook"** – This article reviews the expansion of private credit markets, the associated risks stemming from unregulated lending practices, and the implications for overall financial stability.

8. **"Regulatory Responses to Financial Market Disturbances"** – This piece examines how financial authorities respond to crises in financial markets, including interventions aimed at non-bank financial intermediaries when traditional markets begin to freeze.

9. **"Assessing the Impact of Interest Rate Changes on Financial Stability"** – This article analyzes how changes in interest rates, particularly rising rates, affect risk assets, including crypto, and the financial stability of traditional banks.

10. **"The Future of Financial Regulation: Balancing Innovation and Stability"** – This article discusses the challenges regulators face in keeping up with financial innovation in sectors like crypto and private credit while ensuring systemic stability.

These articles collectively encompass various critical dimensions of financial systems with a focus on non-bank financial intermediaries, the risks they introduce, and the implications for regulatory frameworks.

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Banks have deposit liabilities

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and assets in the form of loans

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and an equity capital base that's quite subject

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to regulatory minimum.

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Whereas most non-bank financial intermediaries, except

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for money market funds and pension funds

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and insurers don't have significant balance sheets.

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Asset managers, in particular channel investors funds

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into assets owned by those investors.

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The risks associated with those assets are born

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by the investors, not

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by the non-bank financial intermediaries.

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On the other hand, the non-bank financial intermediaries

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are subject to little or no regulation,

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and they have no backstops in the form of central banks

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as lenders of last resort as we put it.

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Uh, and they can fail.

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A big example, of course, was a IG, the big insurer in,

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the crisis of 2008, which was one

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of the biggest bailouts ever, right?

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And more recently, there was a big family office, Argos,

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which failed, and required, not a bailout.

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Nobody was gonna step into, bail them out, but it,

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and it didn't require, it implied a lot of losses

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for those banks that extended loans to it.

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The banks didn't know each of them

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what Arch Chagos was borrowing from the others.

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And so you had a knock on effect in particular

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for credit sus, which was exposed about $5 billion worth,

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maybe more to Argos.

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And that contributed to the downfall of Credit Sus,

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in March, 2023.

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The central banks may be forced to intervene

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as market makers of last resort because

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although they won't want to support

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the non-bank financial intermediaries themselves,

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they don't want markets to freeze up.

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Uh, and you could see that happen in, for example, the dash

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for cash in March of 2020 when a number

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of money market funds, for example, got into deep trouble

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and the central banks did have to step in to deal with them,

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as well as corporate bond funds, for example.

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So the problem with the non-bank financial intermediaries

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from the point of view of the authorities is

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that they're not really very much regulated.

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Money market funds are some, but, but

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otherwise there's not much, and,

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and yet they compose major dangers to the financial system.

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The benefits are that these non-bank financial

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intermediaries channel funds from savings into investment,

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and they diversify risks,

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but they can be major sources of risk,

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through leverage the contribution to the,

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their contribution, the buildup

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of debt in the financial system.

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They can also pose liquidity risks.

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Uh, and in particular, we've seen Iman, again,

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the liquidity risks posed by open-ended real estate funds

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where people put in their money.

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They have the guarantee

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and principle that they can take it out anytime,

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but that money is invested in long-term, illiquid assets,

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which can't be

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realized if there's a run on the fund.

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Uh, and,

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and sometimes in those cases, the funds actually have

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to stop people from taking their money out

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by imposing what we call gates.

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There are other sources of risks, in the leverage

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that, non-bank financial intermediaries can build up

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their contribution to the buildup of debt

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in the financial system.

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Finally, we're also concerned by the interconnectedness

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between the non-bank financial intermediaries and the banks

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and the risks that they might pose to the banks, which are

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after all still the center of our financial system.

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And here we have very little real time data on the exposure

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of banks to non-bank financial intermediaries,

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a rebound in debt securities issuance,

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which was significant, especially in Europe,

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a rebound in loans as companies recover,

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recovered from the Covid crisis, and were,

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and were seeking to expand.

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Uh, and they were looking,

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to non-bank financial intermediaries,

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and there were rising valuations.

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The markets were going up,

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and we had this growth of private credit,

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and we had the recovery of the crypto sector,

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which began, which had crashed in the winter

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of 22

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and started to come back, in

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the spring of 23.

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The rise in interest rates,

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which has of course now started to reverse.

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It's important to keep that in mind.

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The rise in interest rates,

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did affect crypto significantly

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because crypto is the prototype of a very risky asset.

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And as rates go up, we have what we, you, you,

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what we call the risk off environment.

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Uh, investors pull out of riskier assets.

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Uh, and that's part, part of what happened to crypto.

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Other things happened to crypto, of course,

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and, in the witcher of 22.

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Uh, but,

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but that was the most important thing As rates started

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to go up de-risking, we now have crypto products

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that are offered by major financial institutions,

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asset managers, that was authorized by the Securities

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and Exchange Commission in the United States

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at the beginning of this year.

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And, it has since been authorized, in Europe.

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And we have therefore the, the,

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the crypto funds, which are being sold

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at a very rapid pace, which are exposing

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ordinary investors who wouldn't easily get into the crypto

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space, right?

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Uh, they're exposing these investors to crypto risks.

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Uh, and that is also an interconnection.

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This is what, what concerns us, an interconnection

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with the non-bank financial intermediary sector,

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in particular, the asset managers

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that are issuing those crypto products.

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We are concerned that crypto market disturbances could

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spread to traditional finance, in particular the banks.

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And if you look at the United States, the, you,

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you have major examples in the failures

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of Silicon Valley Bank, signature Bank and,

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and Silver Gate Bank.

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After the crash of FTX in the OT of 2022,

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investors discovered that, for example,

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Silicon Valley Bank.

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And one of the problems of Silicon Valley Bank was

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that it was holding major deposits from the crypto sector.

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Uh, and in fact, when si, Silicon Valley Bank went under

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that then affected the, so-called stable coin

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that was issued by one of its major depositors circle,

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which had over $3 billion in Silicon Valley Bank.

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So you had a direct connection there, to, from the bank

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to the crypto sector and the crypto sector to the bank.

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Uh, and similarly, silver Gate

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and Signature Bank, both American banks, again, were, had

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to close down because their, their exposures

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to the crypto sector

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and things that were going wrong in the crypto sector in the

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winter of 20 22, 23.

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So we are concerned with that.

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And, with the banks that are acting as

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off-ramps and on-ramps for the crypto sector,

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we're also concerned with stable coins.

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so-called stable coins that are issued, with

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supposed backing from liquid assets.

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There's always questions about whether those issuers,

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in particular tethered, longstanding controversy as

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to whether the most important of these stable coins.

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Tether is really backed by liquid US government securities.

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They say they don't have a proper auditing process.

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Um, so it's hard to tell, what's going on there.

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Uh, but the point is

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that these stable coins are highly concentrated.

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There are only a few of them that really

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play a major role in the financial system.

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And, they hold in principle,

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at least their backing is in financial assets.

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If there's a run on a stable coin,

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it's like a run on a money market fund.

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They're very similar to money market funds, actually,

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a run on a stable coin, people wanting to get fiat money

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in exchange for their stable coin would force the issuers

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of the stable coin to sell the securities

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that are backing the stable coin,

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and that then could have a major knock on effect on the

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markets and those securities, which then could be a threat

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to financial stability.

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In the European Union, about 60% of fund assets are managed

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by companies that are owned by banks.

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And there's a contrast there with the United States

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where 80% of asset management is freestanding,

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not associated with banks.

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Now, what's the difference there?

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And what, what's the importance of that?

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And that, that's, you can most easily see in an example,

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in the summer of 2007, try to look back

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that far, but these risks recur.

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Uh, the first major event in the financial crisis

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of 2007, 2008, was the

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failure of the decision by one

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of the biggest European banks to close three of its funds

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because they were in trouble.

191
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Okay? Now that is what we call a step in risk. Okay?

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The bank owns a fund, the bank is acting

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as an asset manager, right?

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Uh, but the fund gets in trouble

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and the bank has to step in either to rescue it

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or to close it down and liquidate the assets

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and distribute them to the, distribute

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what there is there to the fund holders.

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That is something that can happen

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on a much more general scale.

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And it's not just a risk to the balance sheets of the banks,

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but it's also a risk, to the reputation of the banks.

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And that's very important in our system,

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that banks have a reputation for stability and so forth.

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If that's endangered by their, by problems with funds

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that they are, that they are managing in their role

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as asset managers, then that's a problem

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for the entire financial system.

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Private finance may be ultimately financed

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by banks, but often goes through and,

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and the loans are extended from insurance companies

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or pension funds,

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or other non-bank financial intermediaries, okay?

214
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And they're direct loans

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to non-financial corporations typically,

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and they're typically to smaller firms, to riskier firms,

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riskier loans, okay?

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They're, they claim the, the lenders claim

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to do this kind of due diligence that banks do,

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for their borrowers, but you can't be entirely sure of that.

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And that then poses risks

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to the non-bank financial intermediation system

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that is intermediating this flow of credit,

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which may not have the same source of covenants,

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for example, risk, modifying factors

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that apply in bank loans.

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And this is a rapidly growing sector, partly

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because the insurance companies, the pension funds,

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a lot of asset managers are looking for higher returns.

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And these loans, these private credit loans

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do offer higher returns,

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and they're often priced in that sense, very aggressively,

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which is another risk as to whether the borrowers ultimately

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can handle that burden.

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So, private credit is now probably over 3 trillion

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in Europe, right?

237
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And that's a, you know, that's a non-trivial number.

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Uh, and the exposures there are quite important.

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There's several things that are constantly on our minds from

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the regulatory point of view.

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One is liquidity and for example, with money market funds.

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And there, there are issues that

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were supposedly dealt with in the European Union

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by a regulation in 2017.

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We maintain that that regulation is insufficient.

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We have proposed that the European Systemic Risk Board,

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we have proposed a number of what we think are important

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policy measures there.

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And so far that has not progressed.

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Uh, the European Commission effectively are waiting

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for a new commission to come in.

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I think the delay in dealing with the risks

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and money market funds that we saw exhibited in March

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of 2020, despite the regulation

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of 2017, that is a risk, set of risks that,

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that worries us,

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otherwise what's front

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and center, in our concerns.

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Private credit indeed, the

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overall interconnections between the banking sector

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and the non-bank sector, those are growing and growing,

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and we have very little ability

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to monitor those interconnections.

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The authorities are more concerned now

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with non-Bank financial intermediation than they used to be.

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And it is one of the big subjects that comes up

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In all those meetings in Basel and elsewhere.

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Uh, and the international conferences that I participate in

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and that sort of thing, non-Bank financial intermediation

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has, I won't say replaced banks as a source

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of concern, but

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but is certainly top of the list for policy makers.

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And part of that, of course, is the connections,

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as I've said, with the banks that provide leverage

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to the not lending to debt

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for the non-bank financial intermediaries.

Regulatory Risks in Banking and Non-Banking Intermediaries

00:00:00 - Banks have deposit liabilities and assets in the form of loans and an equity capital base that's quite subject to regulatory minimum. Whereas most non-bank financial intermediaries, except for money market funds and pension funds and insurers don't have significant balance sheets. Asset managers, in particular channel investors funds into assets owned by those investors. The risks associated with those assets are born

00:00:33 - by the non-bank financial intermediaries. On the other hand, the non-bank financial intermediaries are subject to little or no regulation, and they have no backstops in the form of central banks as lenders of last resort as we put it. and they can fail. A big example, of course, was a IG, the big insurer in, the crisis of 2008, which was one of the biggest bailouts ever, right?

00:01:06 - which failed, and required, not a bailout. Nobody was gonna step into, bail them out, but it, and it didn't require, it implied a lot of losses for those banks that extended loans to it. The banks didn't know each of them what Arch Chagos was borrowing from the others. And so you had a knock on effect in particular

Risks and Regulatory Challenges of Non-Bank Financial Intermediaries

00:01:37 - maybe more to Argos. And that contributed to the downfall of Credit Sus, in March, 2023. The central banks may be forced to intervene as market makers of last resort because although they won't want to support the non-bank financial intermediaries themselves, they don't want markets to freeze up. and you could see that happen in, for example, the dash

00:02:09 - of money market funds, for example, got into deep trouble and the central banks did have to step in to deal with them, as well as corporate bond funds, for example. So the problem with the non-bank financial intermediaries from the point of view of the authorities is that they're not really very much regulated. Money market funds are some, but, but otherwise there's not much, and, and yet they compose major dangers to the financial system.

00:02:40 - intermediaries channel funds from savings into investment, and they diversify risks, but they can be major sources of risk, through leverage the contribution to the, their contribution, the buildup of debt in the financial system. They can also pose liquidity risks. and in particular, we've seen Iman, again, the liquidity risks posed by open-ended real estate funds where people put in their money. They have the guarantee

Risks of Non-Bank Financial Intermediaries and Their Interconnectedness with Banks

00:03:11 - but that money is invested in long-term, illiquid assets, which can't be realized if there's a run on the fund. and, and sometimes in those cases, the funds actually have to stop people from taking their money out by imposing what we call gates. There are other sources of risks, in the leverage that, non-bank financial intermediaries can build up

00:03:42 - in the financial system. Finally, we're also concerned by the interconnectedness between the non-bank financial intermediaries and the banks and the risks that they might pose to the banks, which are after all still the center of our financial system. And here we have very little real time data on the exposure of banks to non-bank financial intermediaries, a rebound in debt securities issuance, which was significant, especially in Europe,

00:04:16 - recovered from the Covid crisis, and were, and were seeking to expand. and they were looking, to non-bank financial intermediaries, and there were rising valuations. The markets were going up, and we had this growth of private credit, and we had the recovery of the crypto sector, which began, which had crashed in the winter of 22

Impact of Rising Interest Rates on Cryptocurrency Markets

00:04:47 - the spring of 23. The rise in interest rates, which has of course now started to reverse. It's important to keep that in mind. The rise in interest rates, did affect crypto significantly because crypto is the prototype of a very risky asset. And as rates go up, we have what we, you, you, what we call the risk off environment.

00:05:21 - and that's part, part of what happened to crypto. Other things happened to crypto, of course, and, in the witcher of 22. but, but that was the most important thing As rates started to go up de-risking, we now have crypto products that are offered by major financial institutions, asset managers, that was authorized by the Securities and Exchange Commission in the United States

00:05:50 - And, it has since been authorized, in Europe. And we have therefore the, the, the crypto funds, which are being sold at a very rapid pace, which are exposing ordinary investors who wouldn't easily get into the crypto space, right? they're exposing these investors to crypto risks. and that is also an interconnection.

Interconnected Risks: Crypto's Impact on Traditional Banking

00:06:25 - with the non-bank financial intermediary sector, in particular, the asset managers that are issuing those crypto products. We are concerned that crypto market disturbances could spread to traditional finance, in particular the banks. And if you look at the United States, the, you, you have major examples in the failures of Silicon Valley Bank, signature Bank and,

00:06:53 - After the crash of FTX in the OT of 2022, investors discovered that, for example, Silicon Valley Bank. And one of the problems of Silicon Valley Bank was that it was holding major deposits from the crypto sector. and in fact, when si, Silicon Valley Bank went under that then affected the, so-called stable coin that was issued by one of its major depositors circle,

00:07:26 - So you had a direct connection there, to, from the bank to the crypto sector and the crypto sector to the bank. and similarly, silver Gate and Signature Bank, both American banks, again, were, had to close down because their, their exposures to the crypto sector and things that were going wrong in the crypto sector in the winter of 20 22, 23.

Concerns Surrounding Stable Coins and Financial Stability

00:07:55 - And, with the banks that are acting as off-ramps and on-ramps for the crypto sector, we're also concerned with stable coins. so-called stable coins that are issued, with supposed backing from liquid assets. There's always questions about whether those issuers, in particular tethered, longstanding controversy as to whether the most important of these stable coins.

00:08:30 - They say they don't have a proper auditing process. so it's hard to tell, what's going on there. but the point is that these stable coins are highly concentrated. There are only a few of them that really play a major role in the financial system. And, they hold in principle, at least their backing is in financial assets. If there's a run on a stable coin,

00:08:58 - They're very similar to money market funds, actually, a run on a stable coin, people wanting to get fiat money in exchange for their stable coin would force the issuers of the stable coin to sell the securities that are backing the stable coin, and that then could have a major knock on effect on the markets and those securities, which then could be a threat to financial stability. In the European Union, about 60% of fund assets are managed

Risks of Bank-Associated Asset Management

00:09:32 - And there's a contrast there with the United States where 80% of asset management is freestanding, not associated with banks. Now, what's the difference there? And what, what's the importance of that? And that, that's, you can most easily see in an example, in the summer of 2007, try to look back that far, but these risks recur. the first major event in the financial crisis

00:10:06 - failure of the decision by one of the biggest European banks to close three of its funds because they were in trouble. Okay? Now that is what we call a step in risk. Okay? The bank owns a fund, the bank is acting as an asset manager, right? but the fund gets in trouble

00:10:38 - or to close it down and liquidate the assets and distribute them to the, distribute what there is there to the fund holders. That is something that can happen on a much more general scale. And it's not just a risk to the balance sheets of the banks, but it's also a risk, to the reputation of the banks. And that's very important in our system, that banks have a reputation for stability and so forth.

Risks in Non-Bank Financial Intermediation

00:11:11 - that they are, that they are managing in their role as asset managers, then that's a problem for the entire financial system. Private finance may be ultimately financed by banks, but often goes through and, and the loans are extended from insurance companies or pension funds, or other non-bank financial intermediaries, okay?

00:11:39 - to non-financial corporations typically, and they're typically to smaller firms, to riskier firms, riskier loans, okay? They're, they claim the, the lenders claim to do this kind of due diligence that banks do, for their borrowers, but you can't be entirely sure of that. And that then poses risks to the non-bank financial intermediation system

00:12:15 - which may not have the same source of covenants, for example, risk, modifying factors that apply in bank loans. And this is a rapidly growing sector, partly because the insurance companies, the pension funds, a lot of asset managers are looking for higher returns.

Challenges in Private Credit and Regulatory Oversight

00:12:43 - do offer higher returns, and they're often priced in that sense, very aggressively, which is another risk as to whether the borrowers ultimately can handle that burden. So, private credit is now probably over 3 trillion in Europe, right? And that's a, you know, that's a non-trivial number. and the exposures there are quite important.

00:13:13 - the regulatory point of view. One is liquidity and for example, with money market funds. And there, there are issues that were supposedly dealt with in the European Union by a regulation in 2017. We maintain that that regulation is insufficient. We have proposed that the European Systemic Risk Board, we have proposed a number of what we think are important

00:13:44 - And so far that has not progressed. the European Commission effectively are waiting for a new commission to come in. I think the delay in dealing with the risks and money market funds that we saw exhibited in March of 2020, despite the regulation of 2017, that is a risk, set of risks that, that worries us,

Growing Concerns Over Non-Bank Financial Intermediation

00:14:15 - and center, in our concerns. Private credit indeed, the overall interconnections between the banking sector and the non-bank sector, those are growing and growing, and we have very little ability to monitor those interconnections. The authorities are more concerned now with non-Bank financial intermediation than they used to be.

00:14:50 - In all those meetings in Basel and elsewhere. and the international conferences that I participate in and that sort of thing, non-Bank financial intermediation has, I won't say replaced banks as a source of concern, but but is certainly top of the list for policy makers. And part of that, of course, is the connections, as I've said, with the banks that provide leverage

00:15:22 - for the non-bank financial intermediaries.

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