FSB scrutinizes non-banks' escalating debt amid global financial risk concerns

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FSB scrutinizes non-banks' escalating debt amid global financial risk concerns

The Financial Stability Board (FSB) has heightened its scrutiny of the escalating debt among non-banking entities, underlining the potential risks to the global financial system. This initiative, led by FSB Chair Klaas Knot, follows significant events such as the "March 2020 dash for cash" and the collapse of Archegos Capital that had severe repercussions on Credit Suisse (SIX: CSGN ).

The review is co-guided by Sarah Pritchard and Cornelia Holthausen and aims to enhance transparency around banks' exposure to investment firms. The initiative also seeks to reduce leverage, echoing earlier efforts by the International Organization of Securities Commissions (Iosco).

An important part of this initiative could be the demand for more collateral from investment funds. This move is endorsed by Verea Ross of the European Securities and Markets Authority (Esma), who supports the clarification of information about non-banks' borrowing.

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