Cross-border links between banks and non-bank financial institutions

Abstract

Cross-border links between banks and non-bank financial institutions (NBFIs) gained momentum in recent years. Banks cross-border claims on NBFIs rose from $4.6 trillion in Q1 2015 to $7.5 trillion in Q1 2020, a faster increase than that of total cross-border claims. Financial centres and large advanced economies play a prominent role, as hosts of the largest and most interconnected NBFIs such as central counterparties, hedge funds and investment funds. The size of banks cross-border links to NBFIs in emerging market economies has also been on the rise, albeit from a low base. The financial market turmoil triggered by Covid-19 revealed several vulnerabilities associated with cross-border linkages between banks and NBFIs.