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EFAMA very much supports the approach taken by the FSB to adopt a targeted methodology by narrowing down its focus to the portion of the shadow banking system that can be defined as a system of credit intermediation that involves entities and activities outside the regular banking system, and raises systemic risk concerns and/or regulatory arbitrage concerns, while not inhibiting sustainable non‐bank financing models that do not pose such risks. EFAMA also supports the view that the development and adoption of new regulatory measures should be guided by the five general principles proposed by the FSB, i.e. focus, proportionality, forward‐looking and adaptability, effectiveness, and assessment and review.
EFAMA also finds it extremely important that the authorities aim at gathering a good understanding of the potential impact and possible unintended consequences of targeted proposals of new regulations on the non‐bank financial activities and players in general, and on the financing of the real economy, in particular. This means that systemic risks should be regulated in a way that best addresses these risks without threatening the existence and competitiveness of these activities or entities.
Furthermore, it is widely recognised that the concept of “shadow banking” is a misnomer that seems to imply that the targeted entities and activities are somehow less legitimate or less transparent than banking activities. EFAMA therefore believes that the authorities should accept to move outside the shadow banking system the activities and entities that will be subject to new regulatory rules in response to the G20 Leaders’ call to strengthen the oversight and regulation of the shadow banking system. In particular, EFAMA strongly recommends that the FSB takes off money market funds (MMFs) from the shadow banking system once the authorities will have implemented the IOSCO recommendations.