Nonbank financial risks persist, FSB urges full reforms
The Financial Stability Board (FSB) published a progress report on July 9, 2025, detailing efforts to enhance nonbank financial intermediation (NBFI) resilience. It notes significant policy deliverables but highlights persistent vulnerabilities and uneven implementation across jurisdictions.
NBFI's growing footprint and systemic risks
Nonbank financial intermediation (NBFI) now accounts for almost half of global financial assets, increasing its importance for financing the real economy.
However, episodes like the 2008 global financial crisis, the March 2020 market turmoil, and subsequent stresses have demonstrated NBFI's potential to create or amplify systemic risk.
Drawing on these lessons, the Financial Stability Board (FSB) developed a work programme to enhance NBFI resilience, aiming to ensure stable financing and reduce the need for extraordinary central bank interventions.
Key policy deliverables to date include enhancing money market fund resilience (2021), addressing liquidity mismatch in open-ended funds (2023), improving nonbank market participants' liquidity preparedness for margin calls (2024), and strengthening the monitoring of leverage in NBFI (2025).
These initiatives largely repurpose existing tools rather than creating new ones, leveraging the extensive micro-prudential and investor protection toolkit already available.
Uneven progress, persistent vulnerabilities
Implementation of these NBFI reforms continues to advance, but at an uneven pace across jurisdictions.
This disparity stems from the sector's heterogeneity, diverse institutional frameworks, and common data challenges.
Despite ongoing implementation, vulnerabilities related to leverage and liquidity mismatches in parts of the NBFI sector, which caused recent market stress, persist.
Full implementation is crucial to limit market participants' reliance on extraordinary central bank and other official sector interventions, and to better prepare authorities for future stress events.
The FSB is now shifting its focus to implementation monitoring and the ongoing assessment of these vulnerabilities, outlining further work in areas such as in-depth analysis, data challenges, and information sharing among authorities.
Unfinished business, lingering risks
This FSB report underscores a critical truth: despite extensive policy work, the core vulnerabilities of nonbank financial intermediation are far from resolved.
The uneven pace of reform implementation means significant pockets of risk, particularly from leverage and liquidity mismatches, continue to threaten financial stability.
The financial system remains exposed to shocks that could still necessitate central bank intervention.