Alternative financing (non-bank financial intermediation)

Topic Guides

Alternative financing/shadow banking, the provision of credit by financial entities that are not banks, has been central to global regulatory reform post financial crisis, as policy makers attempt to balance liquidity demand from the real economy, needed to boost growth, against systemic risks which may jeopardise the stability of the financial sector. This guide focuses on the shadow banking initiatives developed by the Financial Stability Board (FSB) and the European Commission.

Inside this Topic Guide

Topic overview

With regard to the work to transform shadow banking into resilient market-based finance, the FSB has replaced the term “shadow banking” with the term “non-bank financial intermediation” to emphasise the forward-looking aspects of the FSB’s work to enhance the resilience of non-bank financial intermediation. This change in terminology does not affect the substance of the FSB's work in this area, in terms of the monitoring framework and policy recommendations, which aim to address bank-like financial stability risks arising from non-bank financial intermediation.

Non-bank finance, or 'shadow banking', has not traditionally been the prime focus of prudential regulation and supervision. Whilst regulators acknowledge that non-bank finance provides a valuable alternative to bank funding and supports real economic activity, they believe that it may be a source of systemic risk to the financial system, if it involves bank-like activities such as transforming maturity and liquidity and creating leverage.

This guide focuses on the shadow banking initiatives developed by the Financial Stability Board and the European Commission.