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The rise of non-bank financial institutions: implications for monetary policy

Author

Listed:
  • Ryan Niladri Banerjee
  • Boris Hofmann
  • Ding Xuan Ng
  • Gabor Pinter

Abstract

Non-bank financial institutions (NBFIs) have grown significantly in recent years, mainly driven by the growth of investment funds, including hedge funds. These changes reflect the role of bond markets, which have expanded on the back of surging government debt. The rise of NBFIs adds uncertainty to monetary policy transmission, as there could be dampening and amplifying effects. Investment funds appear to strengthen transmission while at the same time making it less stable. Greater uncertainty about transmission due to structural changes in the financial system reinforces the principle of a gradual policy approach while at the same time calling for flexibility in adjusting policy.

Suggested Citation

  • Ryan Niladri Banerjee & Boris Hofmann & Ding Xuan Ng & Gabor Pinter, 2025. "The rise of non-bank financial institutions: implications for monetary policy," BIS Bulletins 116, Bank for International Settlements.
    • Handle: RePEc:bis:bisblt:116
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    References listed on IDEAS

    as
    1. Adrian, Tobias & Song Shin, Hyun, 2010. "Financial Intermediaries and Monetary Economics," Handbook of Monetary Economics, in: Benjamin M. Friedman & Michael Woodford (ed.), Handbook of Monetary Economics, edition 1, volume 3, chapter 12, pages 601-650, Elsevier.
    2. Rodrigo Guimaraes & Gabor Pinter & Jean-Charles Wijnandts, 2023. "The liquidity state-dependence of monetary policy transmission," Bank of England working papers 1045, Bank of England.
    3. Boris Hofmann & Ilhyock Shim & Hyun Song Shin, 2020. "Bond Risk Premia and The Exchange Rate," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 52(S2), pages 497-520, December.
    4. Acharya, Viral & Cetorelli, Nicola & Tuckman, Bruce, 2024. "Where Do Banks End and NBFIs Begin?," CEPR Discussion Papers 18939, C.E.P.R. Discussion Papers.
    5. Grace Xing Hu & Jun Pan & Jiang Wang, 2013. "Noise as Information for Illiquidity," Journal of Finance, American Finance Association, vol. 68(6), pages 2341-2382, December.
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