(Bloomberg) — The Bank of England highlighted the potential risk of non-bank players in amplifying volatility following an analysis of the ‘dash-for-cash’ in financial markets in March as the Covid-19 crisis swept the globe.
The Financial Stability Report noted the rise of non-banks, including big investors like pension funds, investment funds like real estate investment trusts and money market funds, as holding key roles in financial stability. Had central banks not intervened in March, the outcome could have been much worse, according to the report.
“With money market funds already experiencing outflows, further stress would have also raised the possibility of suspensions, which could have directly impacted the ability of some large companies and other investors to access cash,” the report noted.
For several years, regulators including the BOE have been wary of potential risks building up in the range of sectors all classed as “shadow banking”. The credit market