It is vital that work to identify and address systemic risks is carried out jointly across countries, taking a macroprudential perspective rather than solely focusing on the soundness of individual entities. Conclusion Let me conclude. In the past decade, we have seen the role that non-banks play in financing the euro area economy become increasingly important. While this is a welcome development in terms of promoting financial integration and supporting economic growth, it also entails increased risks for the financial system. Interconnectedness between the banking and the non-bank financial sector remains high, increasing the scope for contagion. Given these growing risks, the policy action undertaken to date is becoming ever more insufficient. Indeed, there seems to be a general inertia in the adoption of policy recommendations on non-banks. That has to change. The lack of policy action today may mean the materialisation of risks tomorrow. In particular, a more comprehensive macroprudential framework should be a priority to ensure that non-banks are more resilient and able to provide a stable source of funding to the real economy in both good and bad times. Thank you. 1. Molestina Vivar, L., Lambert, C., Wedow, M. and Giuzio, M. (2020), “Is the home bias biased? New evidence from the investment fund sector”, Financial Integration and Structure in the Euro Area, ECB, March. 2. Financial Stability Board (2013), Strengthening Oversight and Regulation of Shadow Banking. Policy Framework for Strengthening Oversight and Regulation of Shadow Banking Entities, August. 3. “All financial institutions” excludes the Eurosystem. 4.

They should be pursued as a matter of priority, while ensuring a globally consistent approach. Third, it is essential to address risks from non-bank leverage from various perspectives. A key priority should be to develop a globally consistent approach to addressing risk from both financial and synthetic leverage in the non-bank financial sector. Further improving data quality and coverage and information sharing are central to assessing leverage-related risks across non-bank financial sector entities and activities. This work should be complemented by identifying gaps in policy frameworks globally, especially where financial entities are not subject to adequate leverage rules. Fourth, there is a need to enhance margining practices and liquidity preparedness to meet margin calls. Since the March 2020 market turmoil, the non-bank financial sector has been repeatedly confronted with periods of high market volatility and surging liquidity needs from margin calls. Increasing the transparency and predictability of initial margin models and assessing their responsiveness to market stress can help reduce the procyclical demand for liquidity. In addition, ensuring robust liquidity risk management and contingency planning frameworks would mitigate risks associated with inadequate liquidity preparedness. More generally, we must recognise the cross-border dimension of activities and regulatory developments in the non-bank financial sector and the importance of global coordination. For example, the new guidance recently proposed by the US Financial Stability Oversight Council facilitating the designation of non-banks as systemically important demonstrates that these issues are being considered outside of Europe.