Global regulator, the Financial Stability Board, published final policy recommendations to address financial stability risks from nonbank financial intermediation leverage, giving authorities flexibility to select measures that best address risks in their jurisdiction, the FSB announced on July 9.

The recommendations, delivered to the G20, set out an integrated approach for addressing financial stability risks created by nonbank financial intermediation leverage. Authorities should identify such risks and have appropriate policy measures to address them whilst considering potential adverse effects.

The recommendations are directed at FSB member authorities and focus on markets, entities and activities where NBFI leverage poses financial stability risks, which vary across jurisdictions.

The FSB and standard-setting bodies will undertake further work to support authorities in applying the recommendations.

The FSB's 2025 NBFI Progress Report noted that work carried out to date largely completes the original policy elements of the NBFI work programme, agreed upon in response to March 2020 market turmoil.

The FSB's work will now shift from policymaking to assessing vulnerabilities, addressing data challenges, sharing members' policy insights and evaluating reform implementation. The FSB has established the Nonbank Data Task Force, chaired by FSB Chair Andrew Bailey, to address data challenges hindering authorities' ability to assess vulnerabilities in nonbank sectors.

The task force has three objectives: improving authorities' ability to identify and assess vulnerabilities, improving ability to assess and calibrate policies, and exploring information sharing to mitigate financial stability threats.

The FSB launched a test case on leveraged trading strategies in sovereign bond markets to assess progress in addressing key nonbank data challenges.

This area was chosen due to its critical importance to financial stability and key data challenges, including significant cross-border dimensions.

At the South African G20 Presidency's request, the FSB submitted a workplan outlining how the task force's work will be structured. The FSB will publish a report on the test case by mid-2026, detailing ways to address identified data challenges.

The recommendations reflect feedback from public consultation, acknowledging the high degree of nonbank heterogeneity, that leverage in some NBFI segments is relatively limited and unlikely to pose financial stability risks, and that certain leveraged activities can facilitate hedging and enhance market efficiency.

The FSB will also conduct an analytical deep dive on vulnerabilities in private credit, including identification of data challenges in this area.