FSB chair warns of persistent financial system vulnerabilities in non-banks

Warning from Klaas Knot

Systemic risks outside of the formal banking system remain a prevalent issue for financial regulators to tackle, the world’s financial stability watchdog has noted.

In a letter addressed to G20 finance ministers and central bank governors, Klaas Knot, the chair of the Financial Stability Board, stressed that "tail risks remain" despite a gradually fading memory of past turmoil and increasing "optimism over a soft landing for the global economy".  Knot urged financial regulators to do more address issues arising from an expanding shadow bank sector – consisting of actors such as lenders, brokers, asset managers, hedge funds, private equity and pension funds – all of which fall outside the realm of traditional regulated banking and are termed as non-b...