Delivery is on a selected date, you can choose a delivery day of your choice, up to 10 days in advance (Excluding next day delivery. Postcode restrictions apply) An overly heavy hand could end up creating yet more uncomfortable and unintended consequences, said a former financial stability policymaker who declined to be identified. “What is the answer?” he said. “Obviously no one wants no market volatility — that’s a bit weird. Also you don’t want the absence of leverage because we wanted that margining for good reason. But what is a blow-up? How much volatility is too much?” Clearly there is work we still need to do,” Klaas Knot, chair of the FSB, told the Financial Times. “We are moving from policy development to policy implementation,” he said. Before then, the conversation had focused on whether to designate individual non bank institutions — such as major asset managers — as “too big to fail” as global regulators do with systemically important banks. Now policymakers had shifted to identifying risks across the shadow banking sector as a whole, Alder said. Together, the non-banks on regulators’ radar — which include hedge funds, pensions and insurers — account for 50 per cent of global financial services assets.

Ashley Alder, a veteran international markets regulator who now chairs the FCA, said the “turning point” in regulators’ thinking around non-bank financial risks was the March 2020 “dash for cash”, when bond markets went into freefall in the early pandemic, forcing central banks to intervene. Global financial regulators are preparing a clampdown on so-called shadow banking as they confront the unintended consequences of previous waves reform that pushed risks into hidden corners of the financial system. In that speech, he noted that policymakers needed to get the balance right between allowing investors to take their own risks, and global stability. A short-term fix being looked at by regulators is compelling banks to be more careful about their lending to hedge funds. “We need to increasingly rely on banks’ role as the watchtowers of the sector,” said the ECB’s top banking supervisor Andrea Enria in a recent speech. In recent weeks, the UK’s top financial regulator has drawn up plans for a probe into private capital valuations, while the Bank of England has declared such “non-banks” to be so important that policymakers should create a new facility to lend directly to them in times of crises.

Product reviews

Hedge funds have come under particular scrutiny in recent months for a combination of reasons including their size, their opaque nature and the perception that they must take big risks to justify charging large fees for managing money. We ask that question all the time. I’m relying on clients to tell me the truth,” says a senior banker at one prime broker. The FSB is looking at ways for banks to share information, but market sources say that would be a long and complicated effort.

The European Systemic Risk Board, the Bank for International Settlements and global securities regulator Iosco have all called out mounting risks. The roots of the latest wave of financial regulatory lie, at least partly, in the era created by regulators following the 2008-09 global financial crisis when there was a rush to dramatically reduce risks in the banking sector. Global watchdogs at the Financial Stability Board have launched a new review that could limit hedge fund leverage and increase transparency on their borrowings. In the US, the Securities and Exchange Commission has brought forward policies on fund transparency so stringent that some are suing in a bid to stop them.

There is a question mark about what lurks out there,” he added, because regulators do not have good data on shadow banks’ exposures, something that has inspired the Bank of England’s world first marketwide stress test.