MNI BRIEF: FSB Report To Detail Shadow Bank Reform -Quarles

Financial Stability Board Chair Randal Quarles on Tuesday previewed a report due November addressing the vulnerabilities of non-bank financial institutions that exacerbated market stresses in March which could lead to regulatory changes.

With NBFIs accounting for almost half of financial intermediation and playing a more diverse role in financing the real economy and managing the savings of households, the FSB's initial analysis has revealed a number of issues that may have caused liquidity imbalances or propagated stress, Quarles said.

"Work needs to be done to improve the resiliency of money market funds" and questions remain around the "functioning and resilience of the core government funding markets, especially in relation to the role of leveraged investors and dealer capacity to intermediate in these markets."

"The report will provide a diagnosis of the shock from a financial stability perspective, including how it was absorbed and amplified. The report also will identify areas where policy consideration may be warranted," Quarles, who is also Federal Reserve vice chair for supervision, said in remarks prepared for a virtual event organized for the Securities Industry and Financial Markets Association Annual Meeting. "The FSB is in the early stages of this work. In November, we will deliver to the G20 Summit, and publish, our holistic review of the COVID Event."