macroprudential approach. 1 / 4 bis - central bankers'speeches the nbfi sector has grown substantially since 2008, to almost half of global financial assets. it has also become more diverse. as a result, nbfi is increasingly important for the financing of the real economy. more diverse financing channels are beneficial to the real economy. but the flipside is that vulnerabilities within the nbfi sector can increasingly threaten financial stability. to address these vulnerabilities, the fsb has been looking at imbalances between liquidity demand and supply. let me highlight a few important factors. first of all, liquidity mismatches reduce the ability of certain non - bank entities to handle shifts in liquidity demand. consider an investment fund that offers its investors the possibility of daily redemptions, with no notice period. if the fund has invested for a large part in illiquid or less liquid assets, it may struggle to sell assets to meet redemptions, especially in challenging market conditions. in turn, redemptions may increase if investors are worried that the fund cannot facilitate them. on the liquidity supply side, we are also seeing challenges. for example, bank dealers may be unable to absorb large selling pressures during times of stress, as their balance sheets have generally not kept pace with the increase in the size of debt markets. having analysed both liquidity supply and demand, the fsb is working on policies to prevent the mismatch from becoming excessive. last year, the fsb revised its policy recommendations on addressing vulnerabilities from liquidity mismatch in open - ended funds. the fsb also published policy proposals to enhance the resilience of money market funds in 2021. the ultimate objective in both cases is to improve liquidity risk management by fund managers. the fsb has also been working on margin and collateral calls. unexpectedly large calls contribute to shifts in liquidity demand and can create stress if market participants are insufficiently prepared for them. last month, the fsb launched a consultation for its policy work in this area. the recommendations aim to reduce excessive procyclical behaviour in response to margin and collateral calls. this work will be finalised by year end. further, the fsb is currently exploring policies to address financial stability risks from leverage in nbfi. we know that leverage has the potential to amplify losses through position liquidations or counterparty defaults. leverage can also worsen liquidity

have seen in banking, a macroprudential approach may be useful to lean against the build - up of cyclical vulnerabilities or to address concentration risk. but we mustn't lose sight of how complex and diverse the nbfi ecosystem is. and the difference in how systemic risk propagates. in the nbfi sector this is likely driven more by activities and collective actions, and less by the size of specific entities, as it is in banking. and so, macroprudential policy for nbfi might differ in important ways from the approach used in banking. a further consideration for macroprudential policy is the need to enhance our capabilities in the area of data and analytical tools. the data landscape for nbfi is not as well developed as for banks. to improve this, the fsb is exploring ways to enhance the availability, quality and usability of data. we are also working on the development of additional metrics and new analytical tools to monitor nbfi vulnerabilities on an ongoing basis. for example, stress testing of funds is an important topic for which the fsb will organise a workshop in july, jointly with iosco. lastly, we know that macroprudential policy has important cross border implications, including in terms of reciprocity and home - host considerations. these call for international cooperation. the fsb is well placed to support efforts to achieve this, working alongside key standard setters, like iosco. 3 / 4 bis - central bankers'speeches let me wrap up. we have seen several market incidents recently. incidents that were due to vulnerabilities in the nbfi sector. and though the incidents were overcome, in some cases relying on extraordinary central bank interventions, the underlying vulnerabilities and the amplifiers of stress are still largely in place. this means, for example, that investment funds remain vulnerable to further liquidity strains. and so, it is critical to finalise and implement international reforms to enhance nbfi resilience. thereafter, we will be well placed to assess whether any regulatory gaps remain and to move forward toward a macroprudential approach. today's conference provides an important opportunity to discuss what that could look like. this fantastic building we are gathered in, is set on a solid foundation. with a resilient –'irishweatherproof'– structure. and it is actually two buildings – unified around an atrium that draws in the light. very