The Financial Stability Board today announced the conclusions of its consultation proposal (see FSM Report SHADOW) on a new regulatory framework for shadow banks. Consistent with its July announcement (see Client Report SYSTEMIC43), the FSB has yet to take any specific action in this sector. However, it has for the first time proposed a new surcharge – one that would institute an additional capital penalty on banks active in the shadow sector separate from the pending G-SIB one (see FSM Report CAPITAL178). The FSB has also outlined new high-level principles for dealing with shadow firms and a work program aimed at both a series of sectoral recommendations and broader proposals to be presented to the G-20 summit to be outlined in an October report. As before, money-market funds are targeted for review, although exchange-traded funds are not addressed here (see FSM Report ETF). This report assesses the FSB’s decisions and anticipates likely next steps.

 

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