Oversight Of Shadow Banking: Supervising Non-bank Financial Intermediation (nbfi) & Banking System Interlinkages Training Course

Introduction

The expanding role of Non-Bank Financial Intermediation (NBFI), often referred to as shadow banking, presents significant and evolving challenges for financial stability and central bank supervision. This crucial training course focuses on the specific risks posed by NBFIs and equips supervisors with the essential knowledge and frameworks to effectively oversee their activities and complex interconnectedness with the traditional banking system. Participants will gain a comprehensive understanding of the diverse landscape of NBFI, their potential to amplify systemic risk, and the strategies central banks can employ for robust supervision of these entities and their links to banks. Mastering the supervision of NBFI and its interlinkages with the banking system is paramount for safeguarding financial stability in the modern financial ecosystem.

This intensive training course delves into the various types of NBFIs, including money market funds, hedge funds, finance companies, and special purpose vehicles, and analyzes their unique risk characteristics and potential vulnerabilities. We will explore the intricate channels through which NBFIs interact with the banking system, such as funding relationships, credit provision, and the use of shared infrastructure, and how these interlinkages can become conduits for systemic risk transmission. Participants will learn about the specific supervisory tools and techniques applicable to NBFIs, including enhanced data collection, risk-based oversight, and macroprudential considerations aimed at mitigating the risks arising from this increasingly important part of the financial system and its ties to traditional banks.

Target Audience

• Central Bank Supervisors
• Financial Stability Analysts
• Risk Management Professionals
• Banking Supervisors
• Regulatory Policy Experts
• Macroprudential Supervisors
• Financial Market Infrastructure Oversight Specialists

Course Objectives

• Understand the definition, scope, and key characteristics of Non-Bank Financial Intermediation (NBFI) or shadow banking.
• Identify the different types of NBFIs and their specific activities and risk profiles.
• Analyze the various channels through which NBFIs are interconnected with the traditional banking system.
• Understand the specific risks posed by NBFIs and their potential to amplify systemic risk.
• Learn about the supervisory challenges unique to overseeing NBFIs compared to traditional banks.
• Explore the tools and techniques central banks can use to supervise NBFIs effectively.
• Understand the importance of enhanced data collection and monitoring of NBFI activities and interlinkages.
• Learn how to apply risk-based supervisory approaches to the diverse NBFI sector.
• Analyze the macroprudential implications of NBFI growth and interconnectedness with the banking system.
• Explore international regulatory initiatives and recommendations for the oversight of NBFI.
• Understand the role of central banks in mitigating systemic risks arising from the NBFI sector.
• Learn about the supervisory considerations for specific types of NBFIs, such as money market funds and hedge funds.
• Understand the implications of NBFI for financial market infrastructure and its oversight.

Duration

10 Days

Course content

Module 1: Defining and Understanding Non-Bank Financial Intermediation (NBFI)

• Defining Non-Bank Financial Intermediation (NBFI) and distinguishing it from traditional banking for your module.
• Exploring the motivations behind the growth of the NBFI sector and its role in the financial system.
• Identifying the key characteristics and activities of NBFIs (e.g., lending, securities financing, asset management).
• Understanding the terminology and classifications used to categorize different types of NBFIs.
• Analyzing the global trends and evolution of the NBFI landscape.

Module 2: The Diverse Landscape of Non-Bank Financial Institutions

• Examining the activities and risk profiles of money market funds (MMFs) and their potential vulnerabilities for your module.
• Analyzing the role and risks associated with hedge funds and other alternative investment funds.
• Understanding the function and supervisory considerations for finance companies and specialty lenders.
• Exploring the activities and risks of securities financing transactions (e.g., repo, securities lending).
• Examining the role of special purpose vehicles (SPVs) and other entities in facilitating NBFI activities.

Module 3: Interlinkages Between NBFI and the Banking System

• Analyzing the funding relationships between NBFIs and banks (e.g., reliance on bank credit lines, wholesale funding) for your module.
• Exploring how banks provide credit and liquidity support to NBFIs.
• Understanding the role of banks as counterparties in NBFI transactions (e.g., derivatives, securities financing).
• Examining the use of shared financial market infrastructure (e.g., payment systems, central counterparties) by both banks and NBFIs.
• Identifying the potential channels for contagion and systemic risk transmission through these interlinkages.

Module 4: Specific Risks Posed by Non-Bank Financial Intermediation

• Understanding the liquidity risks inherent in certain NBFI activities and their potential for fire sales for your module.
• Analyzing the leverage employed by some NBFIs and its implications for financial stability.
• Exploring the credit risks undertaken by NBFIs and their potential impact on the broader financial system.
• Understanding the operational risks associated with NBFI activities and their reliance on technology.
• Examining the potential for regulatory arbitrage within the NBFI sector.

Module 5: Unique Supervisory Challenges for Overseeing NBFIs

• Understanding the difficulties in applying traditional banking supervision models to the diverse NBFI sector for your module.
• Addressing the challenges of data availability and transparency in NBFI activities.
• Exploring the complexities of regulating entities that may not be deposit-taking institutions.
• Analyzing the need for activity-based and entity-based supervisory approaches for NBFIs.
• Understanding the challenges of cross-border supervision of global NBFI entities.

Module 6: Supervisory Tools and Techniques for Central Banks

• Exploring enhanced data collection initiatives to improve monitoring of NBFI activities and interlinkages for your module.
• Analyzing the application of risk-based supervision frameworks tailored to the specific risks of different NBFIs.
• Understanding the use of stress testing and scenario analysis to assess the resilience of the NBFI sector.
• Examining the potential for direct supervision of certain systemically important NBFIs.
• Exploring the role of macroprudential tools in mitigating risks arising from the NBFI sector.

Module 7: Enhanced Data Collection and Monitoring of NBFI Activities

• Understanding the key data gaps that need to be addressed for effective NBFI supervision for your module.
• Exploring initiatives to collect more granular and frequent data on NBFI transactions and exposures.
• Analyzing the challenges of data standardization and comparability across different types of NBFIs.
• Understanding the use of technology and data analytics to improve NBFI monitoring.
• Examining international efforts to enhance data collection on the shadow banking sector.

Module 8: Applying Risk-Based Supervision to the NBFI Sector

• Developing frameworks for assessing the inherent risks and control environments of different types of NBFIs for your module.
• Tailoring supervisory intensity and focus based on the risk profile of individual NBFI entities.
• Understanding the key risk indicators and metrics relevant for NBFI supervision.
• Analyzing the role of internal risk management frameworks within NBFIs and their assessment by supervisors.
• Applying proportionality in supervisory expectations for different segments of the NBFI sector.

Module 9: Macroprudential Implications of NBFI Growth and Interconnectedness

• Analyzing how the growth of the NBFI sector can contribute to the build-up of systemic risk in the financial system for your module.
• Understanding how interconnectedness between NBFIs and banks can amplify shocks and facilitate contagion.
• Exploring the role of macroprudential policies in mitigating systemic risks arising from NBFI activities.
• Examining the application of tools like leverage limits and liquidity requirements to the NBFI sector.
• Understanding the challenges of extending macroprudential oversight to non-bank entities.

Module 10: International Regulatory Initiatives for NBFI Oversight

• Reviewing key recommendations and standards issued by international bodies (e.g., FSB, IMF) for the regulation and supervision of NBFI for your module.
• Analyzing the progress and challenges in implementing these recommendations across different jurisdictions.
• Understanding the role of peer reviews and international cooperation in promoting effective NBFI oversight.
• Exploring the ongoing evolution of the international regulatory framework for shadow banking.
• Examining the impact of global standards on national supervisory approaches to NBFI.

Module 11: Central Banks' Role in Mitigating Systemic Risks from NBFI

• Understanding the specific actions central banks can take to mitigate systemic risks emanating from the NBFI sector for your module.
• Exploring the use of central bank liquidity facilities to address potential funding stresses in NBFIs.
• Analyzing the role of central banks in overseeing financial market infrastructure used by NBFIs.
• Understanding the communication strategies employed by central banks regarding NBFI risks.
• Examining the potential for direct intervention in NBFI activities under specific circumstances.

Module 12: Supervisory Considerations for Specific Types of NBFIs

• Deep diving into the specific risks and supervisory approaches for money market funds (e.g., NAV stability, liquidity buffers) for your module.
• Analyzing the unique challenges in supervising hedge funds and their complex investment strategies and leverage.
• Understanding the regulatory considerations for finance companies and their lending activities.
• Exploring the oversight of securities financing transactions and their role in market liquidity and leverage.
• Examining the supervisory approaches for other key segments of the NBFI sector.

Module 13: Implications of NBFI for Financial Market Infrastructure

• Understanding the increasing reliance of NBFIs on central counterparties (CCPs) and other clearing and settlement systems for your module.
• Analyzing the potential for NBFIs to contribute to systemic risk through their participation in FMIs.
• Exploring the supervisory considerations for ensuring the resilience of FMIs to shocks originating from the NBFI sector.
• Examining the role of central banks in the oversight of FMIs and their interactions with NBFIs.
• Understanding the implications of NBFI activities for market liquidity and efficiency.

Module 14: Case Studies in Supervising NBFI and Banking System Interlinkages

• Analyzing real-world examples of financial stability challenges arising from the NBFI sector and its links to banks for your module.
• Examining the supervisory responses and policy interventions implemented in different jurisdictions.
• Understanding the lessons learned from past crises and near-crises involving NBFIs.
• Exploring case studies of effective and less effective supervisory approaches to NBFI oversight.
• Fostering interactive discussions and comparative analysis of practical experiences.

Module 15: Developing a Comprehensive Supervisory Strategy for NBFI and its Interlinkages

• Guiding participants in developing a strategic framework for effectively supervising the NBFI sector and its interconnectedness with the banking system within their own jurisdictions for your module.
• Defining clear supervisory objectives and priorities for NBFI oversight.
• Assessing the necessary data collection capabilities, analytical tools, and human resources.
• Developing a roadmap for implementing risk-based supervision and macroprudential measures for NBFIs.
• Planning for continuous monitoring, evaluation, and adaptation of the supervisory strategy in response to the evolving NBFI landscape.

Training Approach

This course will be delivered by our skilled trainers who have vast knowledge and experience as expert professionals in the fields. The course is taught in English and through a mix of theory, practical activities, group discussion and case studies. Course manuals and additional training materials will be provided to the participants upon completion of the training.

Tailor-Made Course

This course can also be tailor-made to meet organization requirement. For further inquiries, please contact us on: Email: info@skillsforafrica.org, training@skillsforafrica.org  Tel: +254 702 249 449

Training Venue

The training will be held at our Skills for Africa Training Institute Training Centre. We also offer training for a group at requested location all over the world. The course fee covers the course tuition, training materials, two break refreshments, and buffet lunch.

Visa application, travel expenses, airport transfers, dinners, accommodation, insurance, and other personal expenses are catered by the participant

Certification

Participants will be issued with Skills for Africa Training Institute certificate upon completion of this course.

Airport Pickup and Accommodation

Airport pickup and accommodation is arranged upon request. For booking contact our Training Coordinator through Email: info@skillsforafrica.org, training@skillsforafrica.org  Tel: +254 702 249 449

Terms of Payment: Unless otherwise agreed between the two parties’ payment of the course fee should be done 7 working days before commencement of the training.