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Shadow Lenders Poised to Get Tougher Rules in Global Crackdown

  • Non-bank perils threatened financial system in March, FSB says
  • Fed actions curbed volatility early in pandemic, group says
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Photographer: Simon Dawson/Bloomberg

Global regulators are preparing to tighten restrictions on investment funds and shadow lenders, concluding they threatened the stability of the financial system at the height of this year’s pandemic-fueled market volatility.

Key areas of vulnerability during the March mayhem included big investors’ dash for cash, significant redemptions in mutual funds and non-government money market funds, as well as leveraged hedge fund trades in Treasuries, the Financial Stability Board said in a report published Tuesday in Europe. The panel of global regulators indicated it would issue proposals next year to make money market funds more resilient and then address risks posed by the broader non-bank financial sector in 2022.