FSB may police shadow banking

DIRECT regulation of shadow banking may be introduced to tackle the risks that could shift there from a more heavily supervised mainstream banking sector, a global watchdog chief said yesterday.

Mark Carney, appointed last week by world leaders to head the Financial Stability Board, said regulating the shadow banking industry will be one of the board’s top priorities in coming months. Carney, also Bank of Canada governor, said higher capital and liquidity standards for mainstream banks will create incentives to push activities to the shadow sector.