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Non-bank financial intermediation (NBFI)
Every year, De Nederlandsche Bank (DNB) analyses non-bank financial intermediation in the Netherlands for the Financial Stability Board's (FSB) monitoring exercise. The aim is to gain insight into the size of the institutions that engage in activities with bank-like risks, but which are not formally banks and that thus fall outside the scope of DNB's banking supervision. Bank-like risks include risks due to liquidity and maturity transformation and leverage (relatively high level of borrowed capital). Previously, such institutions were also known as shadow banks.
Size of NBFI by financial sector
Broadly speaking, NBFI (see figure below) includes the balance sheet size of all financial sectors except banks and the central bank. The captive financial institutions, consisting mainly of special purpose entities (letterbox companies), constitute the largest group, measured by balance sheet total.
* Due to the available data for this period this chart includes financial auxiliaries, which methodologically fall outside NBFI.
Narrowing down NBFI
The figure below shows the size of the non-bank financial sectors in the most recent year available.
The majority of non-bank financial institutions do not engage in credit intermediation; they are thus not exposed to the vulnerabilities that are found in banking. Insurers, pension funds and captive financial institutions are therefore excluded altogether for the purpose of identifying potential risks. A large proportion of investment funds and other financial intermediaries do not engage in bank-like activities either, so only a small part of these two sectors are classified under the narrow measure of NBFI.
Narrow measure of NBFI by economic function
The remainder in the narrow measure of NBFI can be broken down further by Economic Functions (EF). Data are available from 2010 onwards.
Open-ended investment funds such as money market funds, bond funds, hedge funds, mortgage funds and other real estate funds. Investors can easily divest from these funds, making them vulnerable to runs.
Finance companies providing mortgage loans or consumer credit, to the extent not prudentially consolidated in banking groups.
- EF 3
Securities and derivatives dealers trading on their own account, such as market makers and flash traders.
- EF 4
Facilitation of credit intermediation. These entities do not exist in the Netherlands.
- EF 5
Securitisation-based credit intermediation, e.g. issuance of asset- or mortgage-backed securities (ABS/MBS) and collateralised loan obligations (CLOs). This includes only securitisation vehicles insofar as they are not prudentially consolidated in banking groups.
Financial Stability Board (FSB)
The FSB is an international consultative body established in 2009 with the task of promoting the stability of the global financial system. It identifies financial stability risks and coordinates the creation and implementation of international regulations for the financial sector. Its members are financial authorities from 24 countries and jurisdictions, as well as international organisations that include the International Monetary Fund (IMF) and the Basel Committee of Banking Supervisors (BCBS). De Nederlandsche Bank and the Ministry of Finance are also represented. The FSB Secretariat is located in Basel, Switzerland, and hosted by the Bank for International Settlements (BIS).
For further information on the FSB, visit the FSB website.
Read more about the methodology in the tab ‘Explanation’ of the tables Size of non-bank financial intermediation (NBFI).
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