Regulation of shadow banking

6
This would mean that non-bank SIFIs would be subject
to the same capital and leverage requirements as those
applying to banks. Section 165d of the DFA requires
every non-bank SIFI to submit a resolution plan to the
Federal Deposit Insurance Corporation (FDIC) and the
Federal Reserve Board.
Assessment
In the US, the policy framework for non-bank
SIFIs is therefore being organised by applying
regulatory requirements for banks to the non-bank
financial sector. This rather unusual approach to
dealing with shadow banking entities can mainly
be explained by the fact that the DFA was drawn
up as a rapid response to the financial crisis.
The FSB’s proposals go far beyond the already
adopted requirements for shadow banking
entities. Owing not only to the diversity of
shadow banking entities, but also to differences
in legal regimes and, not least, to growing
political resistance, the recommendations are
totally non-binding. It will therefore be down to
each individual jurisdiction to act on the FSB’s
recommendations and incorporate them into
national legislation. It will also be interesting to
see whether the exchange of information between
supervisors will prove an adequate instrument for
avoiding damaging regulatory divergence.
The DFA’s strategy for non-bank SIFIs also
envisages that, once a company is identified as
a non-bank SIFI, it will be treated by supervisors
like a bank. Irrespective of the existing supervisory
structure, non-bank SIFIs will automatically be
subject to oversight by the Federal Reserve Board.
The already convoluted structure of US financial
market supervision is thus likely to become even
more confusing. The Federal Reserve Board has no
experience of supervising non-banks, so conflicts
with the responsible specialist supervisory bodies
cannot be ruled out.
By contrast, the approach taken by the FSB and
the EU seems much more methodical. Unlike in
the US, those responsible began by analysing the
potential risks emanating from shadow banking,
and only then went on to draft regulation. In the
AIFMD, the EU has created a dedicated instrument
for regulating shadow banking entities, among
other things. The directive sets out capital, liquidity
and leverage requirements along the lines of the
Basel framework for banks, but tailored to AIFMs.
26 Regulation of shadow banking