Lagarde calls for tighter oversight of shadow banks in Europe
ECB President Christine Lagarde said non-bank financial firms must face stricter regulation to reduce systemic risk.
European Central Bank (ECB) President Christine Lagarde said Europe needs to toughen regulation of non-bank financial institutions – investment funds, insurers, and pension companies often referred to as “shadow banks.”
Speaking in Amsterdam, Lagarde stressed that while banks have faced tighter rules since the 2008 crisis, the non-bank sector has continued to grow under looser conditions. She noted that the assets of such firms now amount to 350% of Eurozone GDP, compared with about 250% in 2008.
The ECB chief highlighted that the “playing field” remains uneven: banks carry heavy regulatory burdens while funds and insurers enjoy advantages.
However, Europe is debating easing certain requirements for banks. The ECB has set up a working group led by Vice President Luis de Guindos to reduce bureaucracy. However, Lagarde stressed these measures must not amount to hidden deregulation.
The Financial Stability Board (FSB) has already identified the non-bank sector as a top priority for global regulators and is analyzing the use of leverage by funds in the government bond market.
Lagarde outlined a dual strategy: easing burdens on banks while simultaneously tightening oversight of non-bank institutions to reduce imbalances and systemic risks.
The ECB chief highlighted that the “playing field” remains uneven: banks carry heavy regulatory burdens while funds and insurers enjoy advantages.
This is not about lowering the bar for banks, but about raising it for non-bank players,she emphasized.
Regulators fear that in a crisis, central banks would be forced to provide liquidity support to the non-bank sector, posing risks to financial stability. Lagarde urged policymakers “not to wait for the next financial disaster to remember the stakes,” but to act preemptively.
However, Europe is debating easing certain requirements for banks. The ECB has set up a working group led by Vice President Luis de Guindos to reduce bureaucracy. However, Lagarde stressed these measures must not amount to hidden deregulation.
The Financial Stability Board (FSB) has already identified the non-bank sector as a top priority for global regulators and is analyzing the use of leverage by funds in the government bond market.
Lagarde outlined a dual strategy: easing burdens on banks while simultaneously tightening oversight of non-bank institutions to reduce imbalances and systemic risks.
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