Nonbank Financial Intermediation: Stock Take of Research, Policy, and Data

This article reviews research and policy work on nonbank financial intermediation (NBFI), taking a financial stability perspective. It first documents the growth in NBFI, reviews its possible drivers, and documents recent instability episodes. NBFI now often surpasses traditional bank financing, and research on it has increased, including research on its financial stability characteristics. Given NBFI's many forms and dimensions, the article focuses on its market-based forms. Taking a cross-country perspective, it reviews the benefits of NBFI, in terms of access to finance and economic impact, and its risks, specifically those related to interconnections, interactions between liquidity and leverage, and procyclicality. It describes policy steps—underway and possible—to reduce these risks, highlights outstanding issues, and suggests further analytical work. It also considers the current state of available data and the means to address remaining gaps.