Non-Bank Finance: opportunities and risks
Speech by the Deputy Governor of the Bank of Italy
Luigi Federico Signorini

Access to financial resources is essential for growth. The financial
system channels resources through intermediaries and markets, allocating
them within the economic system. The mix of banks, other intermediaries
and market-based finance varies across countries and over time, depending
on history, institutions, and stage of financial development, but certain
common trends have emerged in the last decade.
Since the global financial crisis, the regulation of banks has been
redesigned to address the vulnerabilities that led to accumulation of excessive
risks. The reforms resulted from a reassessment of the role of banks in the
post-crisis world, justified by the adverse systemic effects of their distress.
As banks' role has somewhat shrunk, non-bank financial intermediaries
have taken on an increasing role in the global financial system.1 At the same
time, advances in technology have fuelled the emergence of
technologyenabled financial innovation ("FinTech"), which is one of the areas where
non-bank finance is expanding most rapidly.
A diversified financial system benefits savers and borrowers because it
offers multiple ways of channelling financial resources, including to support
long-term investment, and diversifying risks. The non-bank financial sector
competes with banks, thereby stimulating efficiency and innovation. It can
reduce the vulnerability of the real economy to financial shocks because
funding sources for the real economy can be diversified.
At the same time, the expansion of non-bank finance poses new
challenges to regulators, as the activities of non-bank financial intermediaries
can have their own significant implications for systemic risk. In the case
of the asset management industry, on which I shall mostly focus today,
identifying, monitoring and preventing the build-up of risks from non-bank
finance appears to require fresh thinking, more data, deeper analysis, and,
quite possibly, new policy instruments.
FinTech opens financial intermediation and credit markets to new players
and, at the same time, is bound to change the way traditional intermediaries
operate. It can expand access to financial services, increase competition and
efficiency, by lower transaction costs; but it may also mean that old risks take
new forms and that new (or substantially increased) risks, such as cyber risk,
arise. Detecting such evolving and emerging risks requires understanding and
closely monitoring FinTech activities, especially with a view to closing regulatory
loopholes: among them deviations from the key principle that the same risk
should be subject, in effect, to the same regulatory and supervisory treatment,
regardless of the nature of the agent and its technical means of operation.
There is substantial scope for international cooperation and coordination in
these fields because developments in asset management and FinTech tend to cross
borders quite easily. There is also a lot to be done in cooperation between different
authorities. International coordinating bodies, such as the Financial Stability
Board, are the natural fora for the authorities to elaborate common strategies.
I shall first review the benefits of non-bank finance; then I shall
highlight the potential sources of systemic risk, particularly those from asset
managers, and make some considerations about how they are being / should
be approached by the supervisory authorities. I shall also touch upon the
potential risks from Fintech. As testified by the agenda for these two days
of discussion, these issues are relevant for countries facing very different
economic and financial conditions.
The benefits of a diversified financial system
The role of non-bank finance in the global economy has been increasing,
and is now at least as significant as that of banks. Data collected by the Financial
Stability Board (FSB) show that at the end of 2017 the assets of non-bank
financial intermediaries reached 180 trillion dollars, about 48 percent of the
global financial sector's total assets; the assets of banks accounted for 39 percent
of the total.2
The non-bank financial sector includes a variety of intermediaries. Some
of them perform credit intermediation functions, either issuing loans directly
or facilitating credit provision through financial market instruments; others
support equity financing in various ways. In certain business models, entities
that intermediate market instruments engage in liquidity transformation,
maturity transformation, and the creation of leverage just as banks do.
These activities used to be referred to as "shadow banking" because they are
usually subject to less stringent prudential regulation and supervision than
banks. Last year the FSB decided to avoid using this definition, recognising
that non-bank credit intermediation can be beneficial, provided its risks are
appropriately monitored and regulated.
Activities that could generate bank-like risks are identified by the FSB
under a narrow definition of non-bank financial intermediation, and include
various entities, such as collective investment vehicles with features that
make them susceptible to runs; finance companies engaging in loan provision
that is dependent on short-term funding; market intermediaries that depend
on short-term funding or secured funding of client assets (mostly
brokerdealers); trust companies and structured finance vehicles.3 The assets of these
entities represent 14 percent of total global financial assets in the jurisdictions
monitored by the FSB, and have grown by almost 60 percent since 2007.4
The importance of non-bank finance varies across jurisdictions, and
depends, among other things, on the degree of financial development.
Non-bank finance tends to be quantitatively more significant in countries
with well-developed markets. In the United States, the assets of non-bank
financial institutions account for 62 per cent of the total assets of financial
corporations, exceeding those of banks. In the larger European economies
the sector is less developed: the corresponding figure is about 35 per cent in
France and Germany and below 30 percent in Italy and Spain. While in most
emerging markets banks are still the largest sector of the financial system, in
some of them non-bank finance has grown very rapidly.
Banks traditionally perform a key role in the financial system because
of the monetary nature of their main funding source (deposits), and their
ability to bridge the gap between lenders and borrowers through the creation
and accumulation of knowledge on the behaviour of the former and the
creditworthiness of the latter. One of the advantages of banks with respect
to other institutions is that they bundle different information-based products,
exploiting synergies between payment services, liquidity provision and
monitoring. There is an enormous literature to explain why banks exist,
which I cannot even start to summarise here.
At the same time banks may be less efficient than other intermediaries
in providing certain standardised services in isolation. While bundling
can provide synergies and economies of scope, unbundling can allow
specialised intermediaries to operate at a lower cost and to exploit other
advantages of specialisation. FinTech is widely expected to enhance the
ability of non-banks to challenge banks on this ground.
In other cases non-bank intermediaries profit from the ability to tailor their
services to specific needs. In developing economies, to make one example,
finance companies may be important, as they can cater to households and
micro and small enterprises, improving financial inclusion; small loans are
often bundled with the provision of liquidity services to clients that are too
small to be profitable for banks.5 To make another, quite different, example,
bank loans might not be suitable - or available - to support businesses
engaging in research and development as banks require collateral to mitigate
risks; venture capital firms and private equity funds could be more effective
in this specific domain.6
From the point of view of savers, collective investment vehicles, such
as mutual funds and pension funds, provide investors with a wide range of
investment options, with different risk-return profiles. Institutional investors
such as insurance companies, and pension funds can focus on long-term
"patient" finance more than banks, due to the nature of their liabilities.
Non-bank financial intermediaries also facilitate the deepening of
financial markets. They channel savings towards market instruments,
supporting issuers and providing liquidity and diversification to savers. Asset
managers, and other entities that specialise in market finance, increase the
efficiency and liquidity of capital markets, and investors' opportunities for
diversification.
A vibrant non-bank financial sector increases competition in the financial
system, reducing transaction costs and improving the quality of services.
Incumbents, including banks, can see some of their advantages eroded as new
players enter the market, exploiting economies of scale in specific business
segments. Examples of this are institutions offering payment services or
asset managers specialised in catering to the needs of investors with certain
risk-return profiles.
New digital technologies are increasing the options for alternative
providers of financial services, because they can be used to unbundle some
of the services offered by banks. Technology-driven financial innovation
can be particularly beneficial for developing countries because it makes
services more affordable and accessible; but it can increase access to
finance in advanced economies too. Thanks to technology there are greater
opportunities to acquire and process information, reducing some of the
traditional advantages of banks. Banks of course can adopt these technologies
themselves, but non-bank entities sometimes are in apposition to exploit
them more effectively, because they do not have to upgrade legacy systems
and internal procedures; they can effectively "leapfrog" them.
Some see these developments as an existential threat to banks. The
banks' future is linked to their ability to exploit the unique features of their
The
core mix of activities to the full; but they need to evolve and adapt.7
benefits of physical proximity to clients afforded by the banks' traditional
large, costly networks of branches, are becoming less important as savers
and borrowers can access financial service providers remotely. Banks are in
fact reducing the number of branches to cut costs. But in order to reap the
benefits of technology they will need to go beyond cost-cutting and adopt
farsighted and possibly quite far-reaching innovations in their approach to
business and customers. Banks that are both creative and efficient in the use
of technology, while preserving their traditional business advantages, are
likely in my view retain a key role.
What is the optimal mix between banks, non-bank financial institutions
and markets? The academic debate used to contrast intermediary-based
financial systems with market-based ones, often looking for evidence that
one or the other was superior. A more nuanced view is now usually held.8
The optimal structure of the financial system is often found to change with
economic development9.
Whatever the nuances, I suppose most would nowadays agree that
a balanced financial system with multiple, lively channels of financial
intermediation is likely to provide both healthier competition and better
resilience to shocks. Research has shown that when banks are distressed
frictions in credit provision have negative real effects;10 in countries that
have well-developed markets, firms can borrow by issuing securities when
banks tighten credit supply conditions.11 On the other hand, banks can smooth
temporary shocks affecting borrowers and somewhat shield them from
financial market shocks by supporting financial flows, as suggested by the
evidence from studies using microeconomic data on bank-firm relationships.12
Cross-country evidence on various stages of the recent financial crisis has
8
R. Levine, "Bank-Based or Market-Based Financial Systems: Which is Better?," Journal of Financial
Intermediation 11 (4), 2002; for a review of the finance and growth literature see R. Levine, "Finance
and Growth: Theory and Evidence," Handbook of Economic Growth Vol. 1, Part A, 2005.
9
A. Demirgüç-Kunt, E. Feyen, and R. Levine, "The evolving importance of banks and securities markets,"
World Bank Economic Review, 27(3). - As economies evolve, the benefit of further developing
traditional financial institutions tends to decline whilst that of markets increases. Moreover, an IMF
study shows that the relationship between financial development and growth is bell-shaped: financial
development increases growth, but the effect weakens at higher levels of financial development, and
eventually becomes negative. Considering sub-indices of an overall financial development index,
this bell-shaped relationship is due only to the "depth" components of the index; "access" exhibits
a positive linear relationship with growth, while "efficiency" has no robust association with
longterm growth (IMF Staff Discussion Note "Rethinking Financial Deepening: Stability and Growth in
Emerging Markets," 15/08, May 2015)..
10
G. Dell'Ariccia, E. Detragiache, and R. Rajan, "The real effects of banking crises," Journal of Financial
Intermediation, 17 (1), 2008; R. Krozner, L. Laeven, D. Klingebiel, "Banking crises, financial
dependence, and growth," Journal of Financial Economics 84, 2007.
11
T. Adrian, P. Colla, and H. S. Shin, "Which Financial Frictions? Parsing the Evidence from the
Financial Crisis of 2007-9," NBER Working Paper No. 18335, 2012.
12
See for example E. Sette and G. Gobbi, "Relationship lending during a financial crisis," Journal of
European Economic Association 13, 2015; P. Bolton, X. Freixas, L. Gambacorta, and P. E. Mistrulli,
"Relationship and Transaction Lending in a Crisis," Review of Financial Studies 29 (10), 2016;
W. Jiangli, H. Unal, and C. Yom, "Relationship Lending, Accounting Disclosure, and Credit Availability
during the Asian Financial Crisis," Journal of Money, Credit and Banking 40 (1), 2008.
thus provided evidence for both views, which should therefore be seen as
complementary rather than mutually exclusive.
Another key message from the research literature is that an overly
rapid expansion of finance can lead to financial instability, especially if
it is accompanied - as is often the case - by equally excessive leverage
and risk-taking. This reconciles the long-standing view that financial
development is beneficial for growth with post-crisis analyses suggesting
that too much finance can be detrimental.13 Stable growth is promoted by
the ability of financial systems to provide financial services and perform
their allocation function effectively, while keeping risks in check. This
rather general and even obvious observation leads me to the second part
of my speech, where I shall endeavour to make its implications a bit more
specific, and thus also possibly a bit less uncontroversial.
The risks from non-bank finance: the case of asset management
Benefits do not come without costs. There would be little development
without a financial system, yet the economic functions that the financial
system performs, such as credit provision and maturity / liquidity
transformation, imply the creation of risks. These risks not only affect the
stability of individual financial intermediaries: they can also have an impact
on the financial system as a whole, with adverse effects on the real economy.
A long experience with banking informs the regulation and supervision of
the risks generated by banks, imperfect as it will always remain; but as the
financial system becomes more complex, risks take different forms and
extend to different types of intermediaries; the authorities will need to adapt
and evolve in response.
I shall focus here on the risks from one industry that I find particularly
challenging from a supervisory point of view: asset management. This industry
manages a very significant volume of assets, and influences the allocation of
financial resources globally. It includes a variety of asset management models,
and families of funds investing in products with different risk profiles. Some
types of funds, like hedge funds, feature leveraged financial risk, which may
be further compounded by securities lending activities and the creation of
synthetic leverage via derivatives.14 Others, particularly open-ended funds,
perform (among other things) liquidity and maturity transformation, because
they invest in financial instruments that often have a longer maturity than the
funds' shares.
Asset managers mostly provide investment services as fiduciary agents
for their clients; hence, the risks associated with the investments are borne by
the owners of the funds' shares, not by the fund managers. The risks that are
traditionally of concern for the authorities mainly involve agency problems
and information asymmetries between the investors and the asset managers
(misconduct, lack of transparency in the behaviour of the asset managers or
investors not fully understanding financial risks). Accordingly, the purpose
of market regulation and the mandates of market authorities mainly concern
conduct and transparency.
When markets function smoothly, liquidity and maturity mismatches
can be managed because the asset managers deal with a large number of
investors with diversified liquidity needs. In certain situations, however, the
collective behaviour of investors can generate significant externalities, leading
to excessive procyclicality, amplifying the cyclical properties of asset prices
and credit flows. It is well understood that in financial markets procyclicality
can be determined by behavioural phenomena (euphoria and panics), such as
herding.15 In the case of the asset management industry, procyclicality can be
exacerbated by the pricing rules for fund shares, the incentive structure for
fund managers and the benchmarking of fund performance.16
14
Some asset managers provide their clients with indemnification, a type of insurance associated with
securities lending. When the borrower of a security defaults on the loan and the collateral received
is insufficient to cover the repurchase price of the lent securities, the shortfall is borne by the
indemnification provider.
15
See for example D.S. Scharfstein and J.C. Stein, 1990. "Herd Behavior and Investment." American
Economic Review 80; T. Lux, "Herd Behaviour, Bubbles and Crashes," Economic Journal 105, No. 431,
1995; and Shiller, R. J., "Conversation, Information and Herd Behavior," American Economic Review,
Vol. 85 (2), 1995. For a review of the literature D. Hirshleifer and S. H. Teoh, "Herd Behaviour and
Cascading in Capital Markets: a Review and Synthesis," European Financial Management 9 (1), 2003.
16
Inflexible net asset value (NAV) fund share pricing, that does not factor in the investment losses of
trading illiquid assets, can generate a first-mover advantage for an open-end mutual fund and exacerbate
the incentive for investors to run. Benchmarking and relative performance mechanisms, which are
common tools to address the principal-agent problem in the investment management industry, may
lead to a focus on short-term returns and thus reduce the investment horizon of the manager. Incentive
structures may increase risk-taking and short-termism by asset managers.
In times of stress the behaviour of investors can depress the prices of
assets by pushing them well below their fundamental values. If investors
fear that the liquidation value of their shares will decline as other investors
liquidate their positions, they will have an incentive to redeem their shares.
When they invest through funds, their joint behaviour could produce massive
redemptions, putting pressure on funds. Funds will be forced to liquidate,
with adverse effects on asset prices and market liquidity.17
Trades by large investors are more likely to turn into fire sales,
magnifying the impact of temporary shocks on market prices and leading
to severe liquidity stress and extreme volatility. As asset prices decline,
other intermediaries holding those assets (including banks) face losses,
collateral becomes less valuable and borrowers are affected, with negative
consequences for the real economy.
Interconnectedness is another source of externalities from a systemic
risk perspective. Externalities related to interconnectedness can arise because
intermediaries are linked through bilateral balance sheet exposures or on the
derivatives market, or because they are jointly exposed to common shocks.
Ownership links between intermediaries might require the provision of
liquidity support in case of fund distress, either because of existing guarantees
or committed credit lines, but also with a view to avoiding reputational
damage. For very large financial institutions the web of interconnectedness
is highly complex and opaque.18 Interconnectedness mitigates the impact of
small shocks but can amplify large ones.
In asset management, a commonality of exposures can arise because the
diversified
assets in which funds can invest are a finite set. Each fund holds a
portfolio but the portfolios of rationally-managed funds of a certain kind
are not likely to be particularly diverse, as most if not all funds will use
basically the same insights from finance theory and therefore follow similar
investment strategies. If everybody in a market owns more or less the same
portfolio and reacts in more or less the same way to disturbances, shocks can
be amplified and spread more easily across markets and asset classes.
The real significance of these risk is the subject of an ongoing debate.
There are many reasons to believe that they are not negligible, at the very
least. Not only is the asset management industry very large, but it is also
increasingly concentrated. According to one source the market share of the
top twenty firms is more than 40 percent.19 In the United States, the top 10
managers owned about 5 per cent of the United States stock market in 1980;
in 2016 they owned about 23 per cent.20 The commonality of exposures
is substantial; evidence suggests that during stress episodes bonds with
concentrated mutual fund ownership tend to experience larger price drops.21
Some other structural changes may further exacerbate the potential for
externalities. First, the diffusion of funds with passive investment strategies,
for example ETFs, could create distortions in the pricing of individual
securities by applying mechanical investment rules, and thereby amplify
trading patterns.22 Second, automated trading may lead to less diversified
behaviour in response to shocks, increasing the procyclicality of prices and
liquidity.23
Applications of new technologies, such as high-frequency trading,
algorithmic trading and robo-advisors, may improve market efficiency and
reduce intermediation costs during normal times, but have the potential for
making the behaviour of intermediaries (or, indeed, even individual investors
in the case of robo-advice) more responsive to market news. More analytical
work surely needs to be done, but available studies suggest that mutual fund
investments affect price dynamics in less liquid markets, certain share pricing
19
Data from "The world's largest 500 asset managers", Thinking Ahead Institute and Pensions &
Investments joint research, based on 2017 figures for assets under management.
20
I. Ben-David, F. Franzoni, R. Moussawi, and J. Sedunov, "The Granular Nature of Large Institutional
Investors", NBER Working Paper No. 22247, May 2016.
21
See Manconi A., Massa M. and Yasuda A., "The role of institutional investors in propagating the
crisis of 2007-2008", Journal of Financial Economics 104. More recently, I. Ben-David, F. Franzoni,
R. Moussawi and J. Sedunov, show that ownership by large institutions predicts higher volatility and
greater noise in stock prices ("The Granular Nature of Large Institutional Investors", CEPR Discussion
Paper 13427, 2019). The International Monetary Fund Global Financial Stability Report, April 2015,
reviews available evidence.
22
See V. Sushko and G.Turner, "The implications of passive investing for securities markets,"
BIS Quarterly Review, March 2018, for a discussion of the issue. The evidence is ambiguous, see
for example "The Shift from Active to Passive Investing: Potential Risks to Financial Stability?,"
K. Anadu, M. Kruttli, P. McCabe, E. Osambela, and C.H. Shin, Federal Reserve Board, FEDS
WP 2018-060; also I. Ben-David, F. Franzoni, and R. Moussawi, "Do ETFs Increase Volatility?",
NBER Working Paper No. 20071, April 2014.
23
IOSCO Research Report on Financial Technologies (Fintech), February 2017.
rules create first-mover advantage incentives, and the behaviour of portfolio
managers displays significant herding tendencies.24
Countries with a small asset management industry and less developed
financial markets are not immune to these risks. On the contrary, and maybe
rather paradoxically, they could be even more subject to volatile capital flows
as global players adjust their investment strategies, leading to surges in bond
yields and sharp depreciation of the domestic currency.25 There is evidence
that international investors engage in more herding and momentum trading
in emerging markets than in developed countries.26 Large firms borrow from
international markets, often in foreign currency, which exposes them to the
refinancing and exchange rate risks from the reversal of capital flows.
Policy approaches to risks in non-bank finance
The externalities I have just described require a macroprudential
approach. One of the lessons from the global financial crisis is that aggregate
- i.e. systemic - risk can build up largely unchecked if authorities lack a
broad perspective, and that the consequences of a crisis originating in
financial markets may extend far beyond the fortunes of individual investors.
The authorities in charge of financial regulation and supervision need to be
able to monitor the potential sources of risks, to anticipate the build-up of
systemic risk, and to deploy instruments to prevent it from materialising
when possible; or, failing that, to mitigate their fallout.
As I already mentioned, traditionally the focus of the regulation and
supervision of the asset management industry has been the conduct of these
intermediaries, and its purpose has been to ensure integrity and transparency,
24
See the International Monetary Fund, Global Financial Stability Report, April 2015. While most of the
earlier literature focused on equity trading, the different features of other types of assets can result in
different herd behavior. Analyses of herding in the U.S. corporate bonds among bond fund managers
find that corporate bond herding is substantially higher than the stock market herding (e.g. Cai, F., Han,
S. and Li, D., "Institutional Herding in the Corporate Bond Market," Board of Governors of the Federal
Reserve System International Finance Discussion Papers No. 1071, December 2012).
25
E S. Prasad, K. Rogoff, S. Wei, and M. A. Kose, "Effects of Financial Globalization on Developing
Countries: Some Empirical Evidence," IMF Occasional paper 220, 2003.
26
A number of studies focus on emerging markets, investigating the behavior of mutual funds, for a
survey see G. Gelos, "International Mutual Funds, Capital Flow Volatility, and Contagion - A Survey,"
IMF WP/11/92, 2011; the evidence in the literature suggests that funds tend to avoid opaque markets and
assets, and this behavior becomes more pronounced during volatile times, with portfolio rebalancing
mechanisms contributing to explain contagion patterns. Also C. Jotiikasthira, C. Lundlbadand
T. Ramadorai, "Asset Fire Sales and Purchases and the International Transmission of Funding Shocks,",
Journal of Finance 67(6).
given the limited relevance of the risk of managers' insolvency. More recently,
the focus on liquidity management has increased, but still mainly from the
perspective of individual funds. These issues should continue to receive all
the attention they deserve; but there seems to be a case that they need to be
accompanied by a macroprudential approach. The authorities should assess
how shocks originating in one part of the financial system can be transmitted
to the others components, both directly and through their impact on markets.
This is a very challenging objective, requiring data and complex analytical
frameworks. One tool that could be useful is macroprudential stress testing.
The work on stress testing tools for non-banks is still in its infancy.27
An additional challenge is the identification and design of appropriate
policy instruments. Tools aimed at protecting the stability of individual
asset managers are available in many jurisdictions, for example liquidity
requirements, rules restricting the amount of illiquid assets that can be held
by open-end funds, redemption suspension and redemption gates. Their
effectiveness for macroprudential purposes should be evaluated. Standards
aimed at preventing the excessive accumulation of risk ex ante, such as
minimum maturity-matching rules, are more effective in this sense than
those meant to manage a fund's crisis ex-post, such as gates, which may
even have counterproductive signalling effects. The former set of standards
should in my view include mandatory rules to ensure that funds investing in
illiquid assets beyond a certain share of their portfolios may not operate as
open-ended funds.
Finally, the adoption of a macroprudential approach to the risks arising
from asset management could require the adjustment of the institutional
framework for financial supervision. In many countries, the authorities in
charge of the regulation and supervision of these entities have no
financialstability mandate. Should their mandate be expanded to include financial
stability? Given the cross-sectoral nature of financial stability risks, if
several authorities are in charge of financial stability, how can the exchange
of information and the coordination of policies be ensured? Incentives to
redesign institutions are usually stronger in the wake of a crisis but tend
to wane during good times. Consideration of these issues should not be
procrastinated until the next crisis.
Central banks play a key role in macroprudential policy because their
mandate includes in one way or another a macroeconomic and financial
stability perspective. They also have access to timely information as a result
of monetary policy implementation. Finally, they have the unique ability
to provide liquidity through banks. This proved crucial during the global
financial crisis.28 In designing the institutional framework for macroprudential
policy, authorities should consider if the scope of the lender-of-last resort
function should be expanded to include institutions other than banks. Under
what circumstances, and how, should central bank intervene if the liquidity
stress of a non-bank financial intermediary appears likely to cause contagion
and disrupt markets?
International cooperation is necessary to avoid regulatory arbitrage. The
FSB is the forum that is best suited to coordinating the any efforts to analyse
financial stability risks stemming from non-bank finance, and to devise
common approaches and regulatory standards. With its annual monitoring
exercise the FSB provides the policymaking community with a framework
for analysing risks, and a very useful source of data on non-bank finance;
the coverage in terms of jurisdictions and the degree of harmonisation of the
data have much improved in recent years.
The FSB issued policy recommendations in 2017 to address structural
vulnerabilities in asset management activities, mandating the IOSCO, the
relevant standard setter body, to operationalise them. This work has led to
the development of policy tools for asset managers in the area of liquidity
risk management, and of leverage measures for investment funds to facilitate
monitoring for financial stability purposes and to enable comparisons across
The FSB has also made some progress in studying
funds at the global level.29
the impact of large investors' strategies on market liquidity. In a recent pilot
simulation exercise, the FSB employed a modelling approach to assess the
consequences of market stresses and examined the resilience of liquidity
across a range of corporate bond markets.