Non-bank financial sector: systemic regulation needed

Recent ructions in government bond markets, covered by this Quarterly Review, are the latest illustration of how NBFIs can have a material effect even on the US government yield curve - a primary focus of policy and the benchmark for asset pricing worldwide. [...]the discretionary asset sales by bon...

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Bibliographic Details
Published inBIS Quarterly Review pp. 1 - 6
Main Author Carstens, Agustín
Format Magazine Article
LanguageEnglish
Published Basel Bank for International Settlements 01.12.2021
Subjects
American dollar
Balance sheets
Banking industry
Central banks
Credit risk
Ecosystems
Financial institutions
Funding
Hedge funds
International finance
Investments
Monetary policy
Reserve assets
Securities markets
Volatility
United States > US
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Summary:Recent ructions in government bond markets, covered by this Quarterly Review, are the latest illustration of how NBFIs can have a material effect even on the US government yield curve - a primary focus of policy and the benchmark for asset pricing worldwide. [...]the discretionary asset sales by bond OEFs exceeded the amounts needed to cover redemptions, thus adding to the funds' cash positions, as documented in a special feature in this Review (Claessens and Lewrick (2021)). [...]strains are particularly severe for financial institutions that have US dollar assets but liabilities in local currencies and which can hedge most of the attendant foreign exchange risk only with short-term off-balance sheet instruments, largely FX swaps. [...]risk-taking has contributed to the recent accumulation of debt in the system at large and may have broader financial stability implications, not least because banks fund private market operations and investors.
Bibliography:content type line 24
ObjectType-Feature-1
SourceType-Magazines-1
ISSN:1683-0121