Non-bank financial institutions: assessment of their impact on the stability of the financial system

Sector: Finance | Financial markets and Institutions
Client: EC DG Economic & Financial Affairs
Published: November, 2012
Document type: Report 
Tagged: EC/EEA

The study examines how non-bank financial institutions (in particular money market funds, private equity firms, hedge funds, pension funds, insurance undertakings and central counterparties; and UCITS and ETFs) had performed over the last decade and during the financial crisis. The report addresses the risks run by each of this type of institutions (credit, counterparty, liquidity, redemption, and fire sale risk), and highlights also the risks arising from a number of activities frequently undertaken by these institutions, in particular securitisation (a.o. agency risk), securities lending (a.o. counterparty risk) and repos (a.o. liquidity risk).

The report finally provides a selected overview of approaches for the measurement of financial instability and financial distress.