Global Trustee and Fiduciary Services Bite-Sized Issue 1 2025

8 QUICK LINKS AIFMD CRYPTOASSETS EMIR FINTECH MIFID II/MIFIR MMF NBFI OPERATIONAL RESILIENCE SUSTAINABLE FINANCE/ESG ASIA IRELAND LUXEMBOURG NETHERLANDS NORTH AMERICA UNITED KINGDOM Global Trustee and Fiduciary Services Bite-Sized | Issue 1 | 2025 NBFI FSB Consults on Recommendations to Address Financial Stability Risks Arising From Leverage in Non-bank Financial Intermediation On 18 December 2024, the Financial Stability Board (FSB) published a consultation report on leverage in non-bank financial intermediation (NBFI). The FSB’s proposed policy recommendations are addressed to FSB member authorities and standard-setting bodies (SSBs). They aim to enhance the ability of authorities and market participants to monitor vulnerabilities fromNBFI leverage, contain NBFI leverage where it may create risks to financial stability, and mitigate the impact of these risks. The recommendations build on the 2023 FSB report on The Financial Stability Implications of Leverage in Non-Bank Financial Intermediation , which found that NBFI leverage played a significant role in recent episodes of market stress. The nine policy recommendations cover: • Risk identification and monitoring, supported by a suite of risk metrics, and work to assess and address data challenges; • Measures to address financial stability risks related to NBFI leverage in core financial markets, includingmeasures that affect specific activities, types of entities, and concentration-related risks; • Counterparty credit risk management and private disclosure; • Addressing inconsistencies by adopting the principle of “same risk, same regulatory treatment”; and • Enhancing cross-border cooperation and collaboration. Entities in scope are non-bank financial firms that use leverage, either financial or synthetic, including hedge funds, other leveraged investment funds, pension funds, and insurance companies. Where relevant, banks and broker-dealers are also in scope in their role as leverage providers. The FSB notes that market structures, legal frameworks, and financial stability risks related to leverage vary across jurisdictions. The report outlines general principles for the selection, design, and calibration of policy measures, noting that, inmany cases, combinations of the policy measures outlinedmay be most effective in addressing financial stability risks arising fromNBFI leverage. The FSB is inviting comments on this consultation report and the questions set out within it. Responses should be submitted via this secure online form by 28 February 2025. All responses will be published on the FSB website unless respondents request otherwise. The final report will be published in mid-2025. On 16 December 2024, the FSB also reported strong growth in Non-bank Financial Intermediation in 2023 . Link to Consultation Report here Link to Report here FSB Issues Policy Recommendations to Enhance Non-bank Market Participants’ Preparedness for Margin and Collateral Calls On 10 December 2024, the FSB published policy recommendations to enhance the liquidity preparedness of non-bank market participants for margin and collateral calls in centrally and non- centrally cleared derivatives and securities markets (including securities financing such as repo). The recommendations respond to calls for regulatory adjustments to deal with liquidity strains in the NBFI sector arising from spikes in margin and collateral calls during market stress. The FSB’s recommendations are intended to build on and complement rules and regulations for liquidity risk management and governance that already exist in many sectors and jurisdictions. The FSB’s eight policy recommendations cover liquidity risk management and governance, stress testing and scenario design, and collateral management practices of non-bank market participants, focussing on liquidity risks arising from spikes in margin and collateral calls during times of market-wide stress.