Events in the US spilled over into Europe with the Swiss government-led rescue of Credit Suisse by UBS. This raised concerns over the possibility of further vulnerabilities that may still be lurking in the broader global financial system and shone a spotlight on shadow banking sector involving non-bank financial intermediaries (NBFI).
NBFIs largely fall outside the regulatory environment of mainstream banks. They include credit funds, pension funds, insurance companies, asset managers (e.g., open-ended investment funds), hedge funds, and structured finance vehicles. The growth in the NBFI sector accelerated after the global financial crisis and now accounts for nearly 50% of global financial assets, according to the International Monetary Fund (IMF). SMEs and commercial real estate (CRE) investors have been drawn to non-bank lenders for their funding needs for several inter-related reasons. Non-bank lenders tend to offer:
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