Group of Thirty Warns $260 Trillion NBFI Sector Could Trigger Crisis Bigger Than 2008
Updated
Updated · WSWS · Jun 6
Group of Thirty Warns $260 Trillion NBFI Sector Could Trigger Crisis Bigger Than 2008
1 articles · Updated · WSWS · Jun 6
Summary
$260 trillion in global nonbank financial intermediary assets by end-2024 has created rising systemic risk, the Group of Thirty said, warning a “perfect storm” could produce a crisis on a scale not seen since 2008.
Money market funds, hedge funds and private credit vehicles are vulnerable because they pair illiquid assets with runnable, short-term funding, allowing redemptions or leveraged unwinds to spread stress into core bond markets and banks.
The report pointed to March 2020 bond turmoil, the 2022 UK gilt crisis and earlier money-market runs as evidence that NBFI stress can force central-bank rescues while post-2008 bank reforms left key liquidity risks in the banking system.
Stretched public balance sheets, weaker international policy coordination and poor transparency across NBFIs make future shocks harder to assess and contain, even as support measures risk encouraging still more leverage.
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Nonbank Financial Intermediation (NBFI) Sector: Growth, Systemic Risks, and Regulatory Challenges in a $300 Billion Private Credit Market
Overview
The nonbank financial intermediation (NBFI) sector has grown rapidly, expanding its role in the global financial system. This growth brings new challenges for financial stability, as NBFIs often operate outside traditional banking regulations. The Financial Stability Board has highlighted the importance of leverage within NBFIs, since high leverage can increase systemic risks. A key trend is that many fast-growing NBFI borrowers from banks are now securities investors, not direct lenders to companies, signaling a shift in financial flows. As a result, when banks reduce lending, non-bank sources do not always fill the gap, which can reduce borrowing and debt for small and risky firms.