The global body governing banking, securities and insurance regulators has advanced its framework to govern “shadow” banks, that is, financial entities that are not regulated as banks or otherwise governed by rules the Financial Stability Board believes sufficient to prevent risk to financial markets or the economy. In this report, FedFin assesses the FSB overview of its shadow-bank regulatory framework, an overview published for comment on the criteria that defines shadow banks and the “tool kit” regulators should deploy for them. This overview was issued in concert with actions already under way by other global regulators and additional consultative papers from the FSB. It makes clear that, as requested by Group of Twenty heads of state, global regulators are trying to finalize standards to bring firms identified in this overview under capital, liquidity and similar rules. Firms potentially subject to new requirements include not only money-market funds and those active in securitization (previously targeted by the FSB), but also certain hedge funds, finance companies, securities brokers and credit insurers.
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