{ "title": "Luncheon Keynote Address at the 24th Annual IMF-World Bank International Conference on Policy Challenges for the Financial Sector", "publication": "IMF News, June 13, 2025", "sourceUrl": "https://www.imf.org/en/news/articles/2025/06/13/sp061325-international-conference-on-policy-challenges-for-the-financial-sector", "canonical": "https://www.imf.org/en/news/articles/2025/06/13/sp061325-international-conference-on-policy-challenges-for-the-financial-sector", "overlayPath": "/en/news/articles/2025/06/13/sp061325-international-conference-on-policy-challenges-for-the-financial-sector/index.md", "summary": "Luncheon Keynote Address at the 24th Annual IMF-World Bank International Conference on Policy Challenges for the Financial Sector", "publishDate": "2025-06-13", "sections": [ { "heading": "Context and focus", "content": "- Speaker: Tobias Adrian, IMF Financial Counsellor and Director of the Monetary and Capital Markets Department\n- Event date: June 13, 2025\n- Primary focus: non-bank financial intermediation (NBFI) and its implications for financial stability, surveillance, and supervision." }, { "heading": "Definition and scope of NBFI", "content": "- NBFI described as heterogeneous and complex; rapid growth in size and interconnectedness.\n- From a financial stability perspective, emphasis on entities that:\n - Engage in liquidity and maturity transformation\n - Use leverage\n - Are highly interconnected with major financial intermediaries such as banks\n - Play a vital role in liquidity provision in core funding markets\n- Examples and borderline cases:\n - Includes hedge funds and other leveraged investment funds\n - Typically excludes traditional insurers and pension funds, but structural shifts (partly driven by the low-yield environment) have brought some of their risk characteristics closer to those of leveraged NBFIs" }, { "heading": "Key statistics and market developments", "content": "- Since the global financial crisis, the NBFI sector has:\n - Expanded faster than the global banking sector\n - Grown in scope and complexity\n - Been a key driver of the deepening of global capital markets\n- Financial Stability Board’s latest Global Monitoring Report on NBFI: the sector held or intermediated nearly half of all global financial assets by end-2023\n- IMF Global Financial Stability Report (April 2025) highlighted that hedge funds rely on banks for over half of their funding" }, { "heading": "Financial stability challenges and transmission channels", "content": "- Main challenges:\n - Data and regulatory gaps make assessment and management difficult\n - Banks’ exposures to NBFI create financial stability implications because NBFI generally obtain leverage from banks (e.g., hedge funds via repos and derivatives; private firms via credit lines)\n - Liquidity stress in NBFI can propagate quickly to the banking system through rapid calls on banks’ liquidity lines and to core funding markets\n- Market mechanics and amplification:\n - Asset managers increasingly use leverage to take long futures positions in Treasuries and equities instead of spot trades\n - Leveraged basis trades: arbitrage where leveraged investors short futures and finance long Treasury holdings with repo; a sudden increase in repo rates and higher margin calls can force rapid unwinds\n - Historical episodes: March 2020 U.S. Treasury market volatility and September 2022 U.K. gilt market stress demonstrated amplification and illiquidity effects\n- Information and risk-management gaps:\n - Many NBFI lack comprehensive disclosure requirements, complicating banks’ ability to assess aggregate exposures, concentrations, or correlations\n - Competitive pressures among banks for trading and custody business can produce a \"race to the bottom\" in margins and haircuts, increasing fragility\n - The failure of Archegos in 2021 illustrated systemic vulnerabilities: concentrated derivatives positions, underestimation of aggregate exposures by banks, inability to meet margin calls, simultaneous liquidations generating large losses\n - The Archegos failure had limited systemic consequences in isolation, but similar failures amid broader market stress could generate system-wide adverse outcomes" }, { "heading": "Policy and supervisory priorities", "content": "- Four key supervisory priorities identified:\n - Close data gaps: improve NBFI reporting, increase granularity and consistency\n - Limit regulatory arbitrage: ensure bank-like activities by NBFI remain within the regulatory perimeter and guard against banks creating non-bank subsidiaries to arbitrage regulations\n - Balance entity-based and activity-based regulation: maintain dynamic regulatory scope to capture emerging forms of intermediation (e.g., fintech firms engaging in bank-like activities)\n - Strengthen supervisory cooperation across sectors and borders: coordinated cooperation agreements and timely data-sharing to address global interconnectedness" }, { "heading": "Policy responses and international progress", "content": "- International bodies and recent developments:\n - Financial Stability Board (FSB) has led efforts to enhance resilience in the asset management sector, including reforms to liquidity risk management in money market and investment funds\n - FSB and IOSCO are analyzing options to enhance resilience of funding markets (commercial paper, certificates of deposit, repo, corporate bonds, and sovereign bond markets)\n - Basel Committee on Banking Supervision (BCBS) issued new counterparty credit risk management guidelines in December 2024 in response to lessons from Archegos\n - BCBS’ Revised Core Principles for Effective Banking Supervision (the new Basel Core Principles), issued in April 2024, include provisions enhancing oversight of NBFI-related risks (macroprudential aspects of supervision, corporate governance and risk management frameworks, business model sustainability)\n - BCBS work program for 2025-26 includes a deep dive into bank-NBFI interconnections" }, { "heading": "The IMF’s role and tools", "content": "- The IMF supports the agenda through surveillance, capacity development, and policy advice:\n - IMF Financial Sector Assessment Program (FSAP) has deepened coverage of NBFI and its linkages with the banking system; FSAPs analyze systemic risk and assess policy frameworks and tools in key NBFI sectors (insurance, asset management, securities markets)\n - Global Financial Stability Report: in-depth analysis of risks in investment funds, insurance, leverage in financial markets, and private credit\n - Global Financial Stability Notes: explored vulnerabilities in life insurance and pension businesses\n - Capacity development: regional training and bilateral technical assistance\n- Across IMF efforts, three emphasized recommendations:\n - More intrusive and risk-based supervision\n - Better data and reporting requirements\n - Closer attention to liquidity and conduct risks in private credit funds" }, { "heading": "Conclusion", "content": "- The IMF collaborates with standard setting bodies (FSB, BCBS, IOSCO, International Association of Insurance Supervisors) to develop policy frameworks, assess adherence to standards, and build capacity in member regulatory agencies\n- Financial stability work remains core to the IMF’s macro-financial stability mandate and the IMF looks forward to continued engagement with its membership\n\nAs prepared for delivery, Tobias Adrian, June 13, 2025\n\n---\n\n\n References\n\n- Tobias Adrian\n- IMF Surveillance -- A Factsheet\n- Speeches\n- PRESS CENTER\n- April 2025 Global Financial Stability Report\n- Financial Sector Assessment Program\n- Global Financial Stability Notes\n- https://www.imf.org/en/home\n\nSource: https://www.imf.org/en/news/articles/2025/06/13/sp061325-international-conference-on-policy-challenges-for-the-financial-sector" } ], "bullets": [ "[Markdown version](/en/news/articles/2025/06/13/sp061325-international-conference-on-policy-challenges-for-the-financial-sector/index.md)", "[Structured JSON version](/en/news/articles/2025/06/13/sp061325-international-conference-on-policy-challenges-for-the-financial-sector/index.json)", "[Bundle manifest](/en/news/articles/2025/06/13/sp061325-international-conference-on-policy-challenges-for-the-financial-sector/bundle-manifest.json)", "Published: June 13, 2025", "Speaker: Tobias Adrian, IMF Financial Counsellor and Director of the Monetary and Capital Markets Department", "Event date: June 13, 2025", "Primary focus: non-bank financial intermediation (NBFI) and its implications for financial stability, surveillance, and supervision.", "NBFI described as heterogeneous and complex; rapid growth in size and interconnectedness.", "From a financial stability perspective, emphasis on entities that:", "Examples and borderline cases:", "Since the global financial crisis, the NBFI sector has:", "Financial Stability Board’s latest Global Monitoring Report on NBFI: the sector held or intermediated nearly half of all global financial assets by end-2023", "IMF Global Financial Stability Report (April 2025) highlighted that hedge funds rely on banks for over half of their funding", "Main challenges:", "Market mechanics and amplification:", "Information and risk-management gaps:", "Four key supervisory priorities identified:", "International bodies and recent developments:", "The IMF supports the agenda through surveillance, capacity development, and policy advice:", "Across IMF efforts, three emphasized recommendations:", "The IMF collaborates with standard setting bodies (FSB, BCBS, IOSCO, International Association of Insurance Supervisors) to develop policy frameworks, assess adherence to standards, and build capacity in member regulatory agencies", "Financial stability work remains core to the IMF’s macro-financial stability mandate and the IMF looks forward to continued engagement with its membership", "[Tobias Adrian](http://www.imf.org/external/np/bio/eng/ta.htm)", "[IMF Surveillance -- A Factsheet](https://www.imf.org/en/about/factsheets/imf-surveillance)", "[Speeches](https://www.imf.org/en/news/searchnews)", "[PRESS CENTER](http://presscenter.imf.org/)", "[April 2025 Global Financial Stability Report](https://www.imf.org/en/Publications/GFSR/Issues/2025/04/22/global-financial-stability-report-april-2025)", "[Financial Sector Assessment Program](https://www.imf.org/en/About/Factsheets/Sheets/2023/financial-sector-assessment-program-FSAP)", "[Global Financial Stability Notes](https://www.imf.org/en/Publications/SPROLLs/global-financial-stability-notes)", "[https://www.imf.org/en/home](https://www.imf.org/en/home)" ], "alternates": { "markdown": "/en/news/articles/2025/06/13/sp061325-international-conference-on-policy-challenges-for-the-financial-sector/index.md", "json": "/en/news/articles/2025/06/13/sp061325-international-conference-on-policy-challenges-for-the-financial-sector/index.json", "bundleManifest": "/en/news/articles/2025/06/13/sp061325-international-conference-on-policy-challenges-for-the-financial-sector/bundle-manifest.json" }, "generatedAtUtc": "2026-09-26T03:56:27.574Z" }