ICMA responds to Financial Stability Board’s report on Leverage in Non-Bank Financial Intermediation
28 February 2025 ICMA welcomes the opportunity to comment on the Financial Stability Board’s consultation report on Leverage in Non-Bank Financial Intermediation. This response represents an ICMA-wide consultation response, led by the Asset Management and Investors Council (AMIC) Committee, and the European Repo and Collateral Council (ERCC), as well as feedback from the broader ICMA membership.
ICMA urges policymakers to recognise the diversity of the non-bank financial intermediation (NBFI) sector rather than applying broad banking-style regulations. The FSB should clearly define which firms fall under its proposals and exclude those that do not use leverage, such as MMFs and non-leveraged pension or investment funds.
Regulatory efforts should focus on markets and institutions most critical to financial stability, rather than imposing broad measures. Leverage should be assessed alongside other systemic risk factors, particularly given existing leverage caps and reporting obligations in the investment fund space.
Instead of introducing new activity-based measures (Recommendation 5), which fail to address the identified risks and could disrupt market stability, regulators should prioritise aligning global standards and reporting requirements. The proposed measures risk increasing costs, creating market frictions, and exacerbating procyclicality, particularly in the repo market.
Entity-based measures would also be ineffective, adding unnecessary regulatory burdens without addressing real risks. The LDI fund example shows that systemic issues, not entity-level leverage, were the key concern. Regulation should instead target specific products where risks emerge, identified through cross-border systemic risk assessments.
Authorities should enhance system-wide monitoring and better utilize existing reporting data, removing barriers to data sharing across jurisdictions.
Read the full response here.
Read ICMA’s previous response to the European Commission on macroprudential policies for NBFIs here.
