22 May 2024

Commissioner McGuinness at DG FISMA's technical workshop on macroprudential policies for Non-Bank Financial Intermediation

"with this consultation, we are taking a complete, an overall view of NBFI across all of its different parts.We want to assess macroprudential policies and supervision beyond banks in a cross-cutting way.

So we've time to reflect on this NBFI, I'll just use the acronym rather than the long name.

Because we're launching this review, if you like, a consultation on macroprudential policies for this sector.

And also we have to look at what's happening globally, so that we are consistent.

I think, this title, non-bank financial intermediation, when I speak to my friends about it their eyes glaze over.

And maybe that's how it should be.

Because while it's an important part of the financial ecosystem, it's not something that everybody has a handle on.

And maybe that is the difficulty we face when we're having this conversation about the future.

Because NBFI is a very large umbrella covering many different sorts of financial entities that aren't banks.

So that's a huge chunk.

It includes regulated entities like investment funds and insurance companies.

But though again I note the diversity – investment funds and insurance companies both have their own sets of regulations.

And I think we need to bear that in mind as we look to the future.

It also includes unregulated entities, like family offices.

And also the operators and the infrastructure of capital markets, which again have their own sets of rules.

So as I say, very diverse. But you all know that.

And together, these entities are very important for Capital Markets Union, which is still very much a work in progress, but does have a sense of urgency about it.

Because we know that we've done lots of things to develop the Capital Markets Union.

But we need to go further, and we need political leadership to drive that.

We will do our best in the Commission, as we've done, but we need greater political leadership to complete Capital Markets Union.

That's the political message just to bring home to wherever you're from.

We know because the urgency of this is, is that we don't have a single market for capital.

We have had a single market for 30 years.

The capital markets of Europe are fragmented across 27 national markets.

And we need the different financial entities that make up capital markets today to have the right rules in place so that they can contribute to our overall aim of CMU.

NBFI is also important for financial stability, which should underpin the Capital Markets Union.

Stress events in recent years have shown the sometimes hidden interconnections between NBFI sectors across the financial system.

And this adds a layer of unpredictability and increases liquidity and leverage risks.

Now we have responded to those risks – adding tools to sectoral legislation to mitigate systemic risk from key NBFI sectors.

An example, the recent Solvency II reform has strengthened our management of liquidity risk for insurance companies.

For investment funds, we've done something similar with the recent reform of the AIFMD and the UCITS Directive, by introducing liquidity management tools.

We need to be vigilant about detecting new emerging risks and of course we can never be complacent about financial stability.

So we should take another step when it comes to NBFI.

And make a more complete assessment of how emerging systemic risks are dealt with across this very diverse sector.

So with this consultation, we are taking a complete, an overall view of NBFI across all of its different parts.

We want to assess macroprudential policies and supervision beyond banks in a cross-cutting way.

And I think we need to better understand the risks and vulnerabilities from the different sectors and their impact on the resilience of the financial system.

Commission

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