Global policymakers need more information about whether non-bank investors would likely react to financial stress with panicky debt sales that could accelerate a downturn, the head of the Bank for International Settlements said.
“Those who want to be reassuring stress that — unlike the pre-crisis period — the risky exposures appear to be held mainly outside the banking sector. What concerns me, however, is that we know rather little about the capacity and — more importantly — the willingness of non-bank investors to absorb credit losses,” Agustin Carstens, who heads the umbrella group for the world’s central banks, said in a speech at a Madrid conference* last week.
“If an event triggers a reassessment of risks, these investors could join a selling spree and amplify destabilising market dynamics,” he added.
Central banks know `rather little’ about how nonbanks would react to crisis, BIS chief says
14 June 2019 8:17pm