IMF Calls For Rules On Non-bank Financial Sector To Prevent Turmoil

The non-bank sector now accounts for half of the assets of the entire world financial system and should be more closely regulated to protect its stability, staff economists from the International Monetary Fund said on Tuesday.

The release of the research comes a week before the IMF and World Bank convene a semi-annual gathering of central bankers and finance ministers in Washington, amid the fallout from last month’s failures of American and European banks.

In the years since the 2008 Wall Street meltdown, governments have promoted economic growth by keeping interest rates low while beefing up oversight of traditional banks.

According to the IMF paper, this has driven trillions of dollars of financial assets into the hands of hedge funds, insurance companies, pension plans and others outside the banking sector that may make riskier investments in search of profits but with fewer safeguards and scant publicly available data of the sort needed for oversight.