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<p>Shadow banks, also referred to as non-banks, form a significant and important part
of the financial system. The Financial Stability Board (FSB) estimates non-banks covered
48% of total global financial assets as of 2020.</p><p> </p><p>The Bank of England’s
Financial Policy Committee (FPC) is responsible for identifying, monitoring, and taking
action to address systemic risks and improve the resilience of the UK financial system,
including for non-banks. The FPC undertakes regular monitoring of the non-bank sector,
as well as more periodic detailed assessments and stress testing. For example, in
2021 they published an assessment of the resilience of market-based finance (which
encapsulates non-banks) highlighting existing vulnerabilities within the system. The
Prudential Regulation Authority (PRA) regulates insurers in the UK for prudential
purposes. The Financial Conduct Authority (FCA) is responsible for the prudential
regulation of authorised non-bank financial firms not supervised by the PRA and is
the conduct regulator.</p><p> </p><p>Maintaining a global approach to the non-bank
sector is important given the international nature of the financial system. Through
the FSB, HM Treasury and UK financial regulators are working closely with international
partners to develop global approaches to address vulnerabilities in the non-bank sector.</p><p>
</p><p>On 12 October 2022, the FPC published its most recent assessment on the outlook
for UK financial stability. The FPC welcomed the Bank of England’s temporary and targeted
intervention in response to recent financial stability risk, and emphasised the importance
of the domestic and international non-bank work to address vulnerabilities.</p><p>
</p><p>Regulation and supervision of the non-bank sector and wider financial system
in the Crown Dependencies is conducted by their relevant regulators.</p>
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