New Fed Study: Economic Inequality Key to Growing NBFI Role, Systemic Risk

A new Fed staff note builds on prior research to show not just the link between economic inequality and financial instability, but also how heightened systemic risk due to factors such as NBFI growth is driven by economic inequality.  The study for the first time finds significant correlations between economic inequality and the growing role of nonbank asset managers, investors, and short-term wholesale lenders, observing the proven link between NBFIs and financial-system amplification.

Asset-Manager Passivity Standards Set for Thursday Rewrite

As anticipated, the FDIC has set this Thursday as the date at which it will address concerns that index-fund and other asset managers are no longer passive investors in banking organizations and thus may warrant BHC designation.  We will of course analyze the FDIC’s action immediately after it is released and then provide clients with an in-depth analysis of a proposal that, depending on how far it goes, could not only bring some NBFIs within the regulatory perimeter, but also have a negative impact on banking-organization market capitalization.