Author(s): Fatima Pires
Date published: Sep 2019
SUERF Policy Note, Issue No 103
by Fatima Pires, European Central Bank
JEL-codes: G18, G23, G28, F36.
Keywords: Market-based finance, international risk sharing, diversification, non-banks, investment funds, asset managers, macroprudential policy, regulation, financial stability, systemic risk, financial landscape.
Since the global financial crisis (GFC) the non-bank financial sector has grown rapidly in the euro area and at global level. We currently observe a change in the structure of the financial landscape from a bank-based system to a system that relies more on market-based finance. The Capital Markets Union (CMU) will further foster this development and strengthen the cross-border dimension of investments. This should enhance the resilience of the euro area and can complement the banking union in providing for financial risk-sharing. At the same time, however, the process of financial integration and capital market development may be accompanied by the emergence of new financial stability risks. From a policy perspective, this structural change from a bank-based system to a system that relies increasingly on market-based finance underscores the need for developing a system-wide or macroprudential perspective for the non-bank financial sector to ensure financial stability.
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