GRA · Financial Stability
Spatial financeWhere capital meets hazard, exposure and transition
Nonbank financial intermediation
A growing share of credit and liquidity transformation happens outside banks: in money market funds, open-ended investment funds, hedge funds, private credit vehicles, insurers and pension funds. Nonbanks bring diversity and can also build leverage and liquidity mismatch without bank-style safeguards. This page sets out how nonbank vulnerabilities develop and transmit stress, how they are measured, and which authorities decide.
Nonbank financial intermediation on the record.
Nonbank financial intermediation: how the risk develops.
Funds, credit and liquidity connections. The dossier below sets out how the risk develops, what is measured, where the data come from, how it is modelled and who decides.
Liquidity mismatch invites runs
Funds that offer daily redemptions while holding less liquid assets give early redeemers an advantage. In stress, redemptions accelerate and force asset sales.
Hidden leverage builds
Derivatives, repo and prime brokerage give nonbanks leverage that is not always visible to any single lender. Losses force deleveraging across counterparties at once.
Margin calls drain cash
Sharp price moves trigger variation margin calls. Nonbanks that are unprepared sell assets or draw on credit lines, transmitting stress to markets and banks.
Links back to banks
Banks lend to, provide credit lines to and trade with nonbanks. Stress in nonbanks returns to banks through these links, and through common asset holdings.
Systemic risk dashboard.
The screen a team would use to follow this subject: its measures, states and decisions. Names are examples and values are illustrative.
Systemic risk dashboard
Nonbank financial intermediation · Financial system · Committee meeting 2
Vulnerabilities heat map
percentile vs history, 0 to 100
Exposure network
red: most connected node
Credit-to-GDP gap
What is measured, and how well.
Each indicator carries its unit, its cadence, the kind of source behind it and the evidence label a value would carry. No values are shown: a programme supplies them under its own authority.
| Indicator | Unit | Cadence | Source type | Label |
|---|---|---|---|---|
| Nonbank financial intermediation assets | currency and share of financial assets | annual | FSB Global Monitoring Report | Published statistics |
| Narrow measure of nonbank intermediation by economic function | currency | annual | FSB Global Monitoring Report | Published statistics |
| Open-ended fund liquidity mismatch | share of assets in less liquid holdings | quarterly | Fund regulatory reporting | ESTIMATED |
| Hedge fund leverage | gross notional exposure over net asset value | quarterly | Form PF statistics | Published statistics |
| Money market fund flows | currency per week | weekly | Fund industry and regulator data | REPORTED |
| Bank credit lines to nonbanks | currency | quarterly | Supervisory data | Published statistics |
What nonbank financial intermediation means for exposure, loss and capital.
The exposure, loss, scenario and capital views a risk officer, supervisor or ministry of finance would ask for, with the frameworks they report against. Structures follow supervisory and actuarial practice. Values are illustrative: never prices, ratings or advice.
Transmission channels
How a shock in nonbank financial intermediation reaches credit, market, underwriting, liquidity and operational risk, and feeds back.
Where the evidence comes from.
Named public datasets and institutional records, each with its licence class. Sources by agreement are used only under their terms and never republished.
| Source | What it gives | Licence class |
|---|---|---|
| FSB Global Monitoring Report on Nonbank Financial Intermediation | Size, composition and risks of nonbank intermediation by jurisdiction | Free, FSB terms |
| SEC Form PF statistics | Aggregated private fund leverage and liquidity data | Public domain |
| ESMA risk dashboards and fund statistics | EU fund flows, liquidity and leverage indicators | Free, EU reuse terms |
| Office of Financial Research hedge fund monitor | Hedge fund leverage and repo data | Public domain |
| IOSCO investment funds statistics report | Global fund industry data | Free, IOSCO terms |
Who decides, and what the evidence serves.
Financial Stability prepares evidence. The decisions below are taken by the authorities named, under their own rules, and never by the platform.
| Who decides | The question | Evidence this page serves |
|---|---|---|
| Securities and fund regulators | Which liquidity management tools funds must have and use | Fund liquidity data and stress episodes |
| Macroprudential authorities and the FSB | Whether nonbank leverage or mismatch needs policy action | System-wide monitoring and policy recommendations |
| Fund boards and managers | How to match redemption terms to asset liquidity | Liquidity profiles and comparable fund practice |
| Bank risk committees | How much exposure to nonbank counterparties to accept | Counterparty data and margin practice |
Outputs this topic produces
- Guide to nonbank entity types and the economic functions they perform
- Brief on liquidity management tools in open-ended funds
- Method note on measuring leverage across derivatives and repo
- Questions for boards on margin preparedness
Shared questions the industry asks.
- 01
Where is leverage outside banks?
Borrowing through repo, derivatives and fund structures, and how visible it is.
- 02
Where is liquidity mismatch?
Funds offering frequent redemptions while holding less liquid assets.
- 03
How do nonbanks connect to banks?
Credit lines, prime brokerage, repo and origination links.
- 04
What happens in a dash for cash?
How simultaneous demand for liquidity across nonbanks affects markets.
How the risk arises and transmits.
Nonbank intermediaries perform bank-like functions without the same prudential regulation or access to central bank liquidity. This can be efficient, but it can also recreate the vulnerabilities that bank regulation addresses.
Liquidity mismatch arises when investors can redeem quickly from funds that hold assets which take time to sell. In stress, first movers may get better terms, creating incentives to run.
Leverage through derivatives and repo can be large and hard to observe. Margin calls in volatile markets force rapid deleveraging, which can move prices and spread stress.
Nonbanks are tightly linked to banks. Banks provide credit lines, repo funding and prime brokerage; nonbanks hold bank debt and buy loans. Stress can flow in both directions.
Episodes of market stress have shown that sudden demand for cash across many nonbanks can disrupt even the deepest markets, prompting central bank intervention.
How evidence is gathered, and where it stops.
| Method or data | What it shows | Its limit |
|---|---|---|
| Fund-level data | Assets, liquidity and redemptions | Reporting varies by jurisdiction |
| Repo and derivatives data | Leverage and margin | Fragmented across trade repositories |
| Bank-nonbank exposure data | Interconnections | Limited public detail |
| Stress simulation | Behaviour under redemption and margin shocks | Assumption-dependent |
How it is studied, and what the methods cannot say.
- 01Financial economics and macro-financeRun incentives in funds and banks · Leverage cycles · Implicit guaranteesApplied here
- 02Network science and contagionInterbank contagion simulation · Common exposure networks · Multilayer networksApplied here
- 03Scenario design and stress testingMacro-financial scenario design · System-wide exercises · Reverse stress testsApplied here
- 04EconometricsEarly warning indicators · Quantile regression for growth-at-risk · Spillover estimationApplied here
Where this page leads across the Consortium.
Questions and answers.
What is nonbank financial intermediation?
Why can open-ended funds face runs?
What did the FSB recommend on nonbank leverage?
Is nonbank finance shadow banking?
Does GRA assess funds?
Why does nonbank leverage matter to banks?
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