IMF calls on UK to close gaps in fast-growing ‘non-bank’ sector

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The logo of the International Monetary Fund (IMF) is seen outside the headquarters building in Washington, United States, September 4, 2018. REUTERS / Yuri Gripas / File Photo

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LONDON, Dec. 14 (Reuters) – Britain must close data and surveillance gaps in its fast-growing “non-bank” sector, where liquidity during market crises could be aided by having access to operations on government bonds, the International Monetary Fund said on Tuesday.

Non-banks include hedge funds, mutual funds, pension funds, money market funds, and insurance companies, which collectively now account for half of global financial activity. Read more

Britain is a global financial hub with a significant non-banking sector, said Udaibir Saran Das, IMF advisor and deputy head of monetary capital markets.

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“This is something that we have reported with a certain sense of urgency to the UK authorities, that there are data gaps that need to be filled, the surveillance perimeter… needs to be broadened,” Saran Das said during of a press conference on the IMF. latest assessment of the UK economy and financial sector.

“It’s not just the UK problem anymore, this thing has become an international problem.”

The Bank of England, like its counterparts in the United States and the euro area, injected liquidity into the markets as economies stalled in March 2020 to fight COVID-19, creating a “Pulling for money”.

The intervention kept money market funds and other market participants from freezing, but regulators around the world are looking at steps that can be taken to avoid having to do the same during the next market downturn.

“In the meantime, the authorities should strengthen the security arrangements for the functioning of the main markets in times of stress by considering allowing properly regulated, interconnected and interconnected non-bank financial intermediaries to access repo and / or financial transactions. ‘Gilt purchase,’ the IMF said.

In response, the BoE said its financial policy committee on Monday expressed strong support for global efforts over the coming year to develop policies aimed at addressing vulnerabilities in market finance, if not the risks exposed at the start of the financial markets. blockages in March 2020 would persist. .

“BIG FRANCHIS”

The IMF said Britain’s financial cycle appeared to be slightly ahead of the business cycle, and called for continued “diligent macroprudential and prudential vigilance”.

He welcomed the BoE’s decision on Monday to require banks to boost their capital reserves “for rainy days”, adding that Britain had made “significant progress” in setting in place of its executives for the post-Brexit financial sector.

After Brexit, it will be important for regulators to maintain the primacy of financial stability goals, the IMF said.

The UK Finance Department has proposed that UK regulators aim to keep the financial sector competitive, a proposal that has raised concerns in the BoE about a possible return to lighter regulation.

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Reporting by Huw Jones Editing by Gareth Jones

Our standards: Thomson Reuters Trust Principles.


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