This story appeared in Bank Digest.
The nonbank financial sector appears to be less risky than before the financial crisis, but that does not mean it has been "tamed," according to Fed Vice Chairman Stanley Fischer. In remarks prepared for a conference sponsored by the Bundesbank and German Ministry of Finance, Fischer noted that many nonbank financial companies still rely heavily on secured short-term funding, and many of these are highly leveraged. Trends in the financial system could increase risk, especially when the trends come from parts of the nonbank sector that are not subject to prudential supervision, Fischer observed. Also, transparency is limited, and information on market aspects such as derivatives, leverage, and maturity transformation is inadequate.