Discussion Paper
The Growing Risk of Spillovers and Spillbacks in the Bank‑NBFI Nexus
Abstract: Nonbank financial institutions (NBFIs) are growing, but banks support that growth via funding and liquidity insurance. The transformation of activities and risks from banks to a bank-NBFI nexus may have benefits in normal states of the world, as it may result in overall growth in (especially, credit) markets and widen access to a wide range of financial services, but the system may be disproportionately exposed to financial and economic instability when aggregate tail risk materializes. In this post, we consider the systemic implications of the observed build-up of bank-NBFI connections associated with the growth of NBFIs.
JEL Classification: G01; G21; G23; G28;
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Bibliographic Information
Provider: Federal Reserve Bank of New York
Part of Series: Liberty Street Economics
Publication Date: 2024-06-20
Number: 20240620