We see a benefit in identifying more clearly what NBFIs are as definitions vary and tend to encompass a variety of heterogeneous actors with varying risk profiles. We note that the systemic risk contribution of the funds sector is minimal, as both traditional and alternative funds are already highly regulated and subject to bespoke sector-specific regulation.
For the regulated NBFI sector, such as the fund sector, the focus should not be on further regulating these entities and activities but rather on improving the resilience of the broader financial system. This can be achieved through targeted recommendations and proposals, which are detailed throughout our response to the consultation.
Regarding systemic risks that may arise from other, less regulated or unregulated sectors within the NBFI landscape – it is rarely the case that an entire sector can said to be contributing to systemic risk.
Instead, there may be certain activities being carried on within a sector, or across several sectors, that may potentially contribute to systemic risk. Accordingly, regulators need to approach the identification process from an activity-based perspective rather than a whole sector-based perspective.
Recognizing that macroeconomic risk assessments should not be confined to the EU alone, we would also support broad international cooperation, specifically the sharing of supervisory data and insights between EU and closely connected financial markets.
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