On 16 May 2023, the FCA published a speech given by its Chair, Ashley Alder, at the Managed Funds Associations’ Global Summit in Paris, on the drive for data in non-bank financial intermediation (NBFI). In the speech, Mr Alder explores the global debate on NBFI (which used to be referred to as ‘shadow banking’).

Mr Alder notes that NBFI is shorthand for much of the diverse and often complex investment and funding markets which are not covered by the prudential regulatory frameworks applicable to banks. As public and private debt ballooned amid years of low interest rates and quantitative easing, NBFI grew to represent about 50% of global financial assets.

He warns that, while regulators and market participants have access to a lot of data to assess risks in the open-ended fund, Money Market Funds and central counterparty segments of NBFI, they do not have enough data to measure key risks in private investments and funding markets. To address this, Mr Alder suggests that the priority for NBFI regulation should be a global effort to improve the data needed to enable regulators to spot risks in private markets and supervise them credibly. This should include a good understanding of hidden on or off balance sheet leverage, a better assessment of liquidity risks, and better information on exposures between private markets and traditional banks.

Mr Alder notes that, this year, the Financial Stability Board (FSB) and the International Organization of Securities Commissions (IOSCO) aim to land on a set of concrete policy outcomes for NBFI that could also have implications for hedge funds, alternatives, and private markets in general. The FCA is also closely involved in this work, co-chairing (with the French Autorité des Marchés Financiers) the IOSCO group which is now developing NBFI policy proposals with the FSB.