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Hedge funds officially welcomed in from the shadows


HEDGE funds and other alternative investments will no longer be dubbed "shadow banks" by global regulators, lifting a pejorative label which has stuck to the US$45 trillion sector since the financial crisis.

Treated with suspicion by regulators and policymakers, "shadow banks" have in recent years been welcomed as providing market-based capital to plug gaps left by retreating banks.

The Financial Stability Board, which coordinates financial rules for the Group of 20 economies is replacing the term with "non-bank financial intermediation" in all its work.

"The new terminology emphasises the forward-looking aspects of the FSB's work to enhance the resilience of non-bank financial intermediation," the FSB, which is chaired by Bank of England governor Mark Carney, said in a statement on Monday.

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Although the FSB has introduced tougher rules since the crisis, the term shadow banking is likely to survive with the latest FSB figures showing it grew 7.6 per cent to US$45.2 trillion in 2016, representing 13 per cent of total financial system assets in 29 jurisdictions surveyed.

The FSB also said in a statement it will develop global practices for banks to respond and recover from cyber attacks, and a report will be published by mid-2019.

But the board said much of its work programme will focus on implementing and tweaking rules already agreed, rather than embarking on a wave of new regulation. The appetite for new rules has waned, with the US trimming its rulebook to encourage lending by banks. REUTERS

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