World watchdog details plans to clamp down on shadow banks

Tim Wallace
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SHADOW banks and their links to the rest of the financial sector will come under closer scrutiny under new plans published by global watchdog the Financial Stability Board (FSB) yesterday.

Institutions like money market funds can offer services very similar to deposit taking and will be monitored as regulators fear they can represent a risk to the system.

The agency wants to study ways to make money market funds less susceptible to runs, as more than 100 funds needed support of sponsor institutions in the financial crisis. It also wants to monitor securitisation more closely, as it fears the vehicles allowed a fall in credit standards in the boom years.

However, the FSB stressed it welcomes alternative sources of finance, and does not want to hit lending with excessive red tape.