In a recent article posted by the Atlantic Council, BWC Member Hung Tran dives into the expansion of financial stability risk from the tightly regulated banking sector to a variety of nonbank financial institutions (NBFIs). Tran explains that while NBFIs play a key role in diversifying funding sources and broadening access to finance, it is important that economists analyze the specific entities and activities that pose a risk to global financial stability rather than merely comparing banks to NBFIs. Tran states that the shift of lending and counterparty exposure risk from banks to NBFIs has reduced vulnerability in certain areas while causing new risks in others. Overall, Tran imparts the statement that economists divert attention away from fundamental risk factors by repeating the claim that future global crises will be inspired by the shift of lending from banks to NBFIs. He warns it is important not to let this shift distract from the greater global financial risk factors ahead. 

To read the full article, click here.

All views expressed by members are their own and not reflective of the views of the Bretton Woods Committee.