The Strategist

IMF calls for regulation of financial sector’s non-banking segment

04/05/2023 - 03:46

The International Monetary Fund stated in a study released Tuesday by staff economists that more attention needs to be given to regulating the non-banking segment of the financial sector in order to protect stability as it now makes up half of the assets in the global financial system.

The study is released a week prior to the semi-annual IMF and World Bank meeting in Washington, which will bring together central bank governors and finance ministers from around the world to discuss, among other things, the effects of the March bank collapse in the US and Europe.

Governments have been boosting economies by keeping interest rates low while strengthening oversight of traditional banks since the 2008 US stock market crash.

IMF economists estimate that these actions resulted in accumulation of trillions of dollars of financial assets in hedge funds, insurance companies, pension funds and other companies outside the banking sector, willingly investing in riskier assets for higher returns, but with insufficient safeguards and no disclosure to provide the level of oversight required.