The Bank for International Settlements (BIS) calls for a significantly stricter set of rules for financial market players outside the traditional banking sector.
In the quarterly report published on Monday, BIS General Director Agustin Carstens speaks out in favor of a fundamental revision of the regulatory framework for shadow banks, which the BIS includes in particular investment, money market and hedge funds, asset managers and institutional investors and which they classify as “non-banks -Financial Intermediaries ".
Markus Frühauf
Editor in business.
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They controlled $ 200 trillion, or half of the world's financial assets, said BIS chief economist Claudio Borio at the online press conference on Monday. The Basel-based BIS is considered to be the bank of the central banks because it manages their foreign exchange reserves on the one hand and serves as a monetary policy think tank on the other. With the quarterly report that has now been submitted, the BIS concludes its investigations into the distortions on the American bond market at the beginning of the Corona crisis in March 2020.
At the time, investors wanted to pull their money out of funds on a large scale, which in turn forced the funds to sell stocks.
The enormous sell-off temporarily shut down important market segments, including the US government bond market.
This required extensive support measures from the US Federal Reserve.
For BIS head Carstens it is unacceptable that such incidents should be repeated on a regular basis.
The turbulence in the bond markets showed that the investment companies were also influencing monetary policy.
Specifications for more transparency
In order to be better equipped with liquidity in stressful situations, the BIS proposes the establishment of war chests.
In addition, Carstens is calling for more transparency through closer regulatory supervision and expanded reporting requirements.
Here the former finance minister and central bank governor of Mexico refers to the example of the internationally agreed measures to stricter regulation of banks after the financial crisis in 2008. These regulatory reforms would have strengthened the banks and reduced their threat potential to the financial system.
Chief economist Borio believes the current regulation of asset managers is too strongly geared towards individual society and the protection of investors, but too little towards financial stability.
Markets and central banks at odds
In the opinion of the BIS, the most recent developments on the financial markets were characterized by the fact that the markets did not follow the central banks' inflation assessments, which classify the price increase as only temporary. This was shown by the significant increase in bond yields, especially in the shorter maturity segment. The strength of the American dollar made financing conditions more expensive in some emerging countries, where the central banks had to counter the inflationary pressure beforehand.
While the risk appetite of investors in industrialized countries still proved to be resilient in the third quarter, uncertainty arose at the end of November due to the Omikron variant of the corona virus.
This has recently somewhat limited the price gains on the stock markets.
Borio sees the omicron variant as a warning signal that vigilance for the risks of the pandemic must not be slackened.
According to him, the new virus variant can exacerbate the problem of supply chain bottlenecks in the short term, which will inevitably affect the economy, especially in the first quarter of 2022. This makes it more difficult for central banks to assess the economic environment, also with a view to inflation developments.