On September 20, FDIC Chairman Martin J. Gruenberg delivered prepared remarks
at the Exchequer Club, discussing the risks posed by nonbank financial institutions (nonbanks) to the U.S. financial system. He noted that nonbanks hold a significant share of the financial sector, with assets totaling around $20.5 trillion in 2021, emphasizing their importance alongside traditional banks. Gruenberg highlighted the financial stability concerns associated with nonbanks, especially their limited regulation and supervision compared to traditional banks. He further mentioned the interconnectedness between nonbanks and banks, and the potential for nonbanks to transmit risk during market shocks, which underscores the need for attention to these issues. Specifically, Gruenberg stated that the “information about the risks undertaken by a variety of nonbanks is severely lacking”, and transparency about these issues will ensure a safer financial system. Gruenberg also pointed out that nonbanks are becoming increasingly active in mortgage finance, business lending, and consumer financial services. He discussed some risks associated with hedge funds and leveraged investment vehicles generally, such as their reliance on short-term funding, and their potential to disrupt the stability of financial markets. Gruenberg concluded by advocating for a comprehensive strategy to address the financial stability risks posed by nonbanks, emphasizing the importance of transparency, oversight, and prudential requirements for nonbank financial institutions.