FRANKFURT (Reuters) – Non-bank financial institutions (shadow banks) are growing rapidly in the euro zone and pose a growing risk to the entire financial system, which must push banks to be stricter with these institutions, a said Andrea Enria, head of supervision at the European Central Bank (ECB).
Non-banking institutions, which include investment funds or insurance companies, now hold 31,000 billion euros in assets, a volume equivalent to 80% of banking sector assets, but these institutions are less regulated and often take riskier bets.
“Risks related to the non-bank financial intermediary (NBFI) sector could increase in the coming months as monetary policy continues to bring inflation back to target,” Andrea Enria said on Tuesday, saying the risks have subsided. many” accumulated.
“Leverage has increased among NBFIs, there is a significant mismatch between the maturity of their assets and liabilities, and there are indications that these players are ill-prepared for a large demand for liquidity,” he said. warned Andrea Enria.
“The problem is that NBFIs have remained unregulated and risks have grown unchecked,” warned Andrea Enria.
However, non-banking institutions are closely linked to the banking sector, forcing banks to manage their customer risk more actively.
“The financing of banks by NBFIs is probably one of the most important stress propagation channels, since the liquidity reserves of non-bank institutions are stored mainly in the form of bank deposits, and NBFIs interact on the repo markets with the banks”, explained Andrea Enria.
Shadow banks also tend to interact with a small group of systemic banks, which would therefore be the first to be affected by contagion effects in the event of a crisis.
New regulations would be ideal but will take time, making banks vulnerable in the short term.
“For now, the most important thing is that banks are aware of the risks and manage them in their interactions with NBFIs,” said Andrea Enria.
“The key message is that we expect institutions to go beyond mere compliance with regulatory requirements,” concluded Andrea Enria.
(Report Balazs Koranyi, Corentin Chapron, edited by Blandine Hénault)
Copyright © 2023 Thomson Reuters
I have over 8 years of experience working in the news industry. I have worked as a reporter, editor, and now managing editor at 247 News Agency. I am responsible for the day-to-day operations of the news website and overseeing all of the content that is published. I also write a column for the website, covering mostly market news.
