MarketWatch writes "FSB to scrutinize 'shadow banking' system". The article (from London) says, "The Financial Stability Board said Thursday it will focus on money-market funds, securitizations and securities lending and repos more as it tackles the problem of regulating the so-called shadow banking system. The FSB has a mandate from the Group of 20 leading industrialized and emerging economies to draft recommendations on reforming the financial sector worldwide to avoid a recurrence of the 2008 financial crisis. Regulators are afraid that banks will simply outsource excessive risk-taking to such "shadow banks", now that they have raised the cost of risk-taking with the new banking rules on capital and liquidity, which were finalized last year by the Basel Committee for Banking Supervision.... The FSB said it intends to propose policy recommendations on most of the above by July 2012. The sole exception was securities lending and repos, where recommendations will be drafted by the end of next year." See also, the Financial Stability Board's press release and Reuters' "G20 task force steps up work on shadow bank rules", which says, "The Institutional Money Market Funds Association rejected the FSB's description of money market funds as shadow banks." Reuters quotes IMMFA Chairman Travis Barker, "The only thing they share in common with a bank is that they transform liquidity, but they do so on a tiny scale and subject to rigorous constraints."
