Non-bank financial intermediation: Canada’s submission to the 2023 global monitoring report

Introduction

The global non-bank financial intermediation (NBFI) sector has grown significantly since the 2008-09 global financial crisis. In response, the Financial Stability Board (FSB) established the Non-bank Monitoring Experts Group, which collects data annually from 29 jurisdictions and produces the Global Monitoring Report on Non-Bank Financial Intermediation (GMR) (Financial Stability Board 2023). The GMR monitors growth in the NBFI sector and key subsectors across each jurisdiction.

The Bank of Canada works closely with Statistics Canada, the Ontario Securities Commission and the Office of the Superintendent of Financial Institutions to compile Canadian data for the GMR.

We share insights from data from 2002 to 2022 that the Bank has collected and submitted to the FSB for inclusion in the GMR. Although we provide context for recent developments, we do not present the Bank's overall assessment of vulnerabilities relating to either Canadian NBFI entities or more general activity in core financial markets. The Bank's Financial Stability Report-2024 contains the most recent assessment of vulnerabilities associated with the NBFI sector (Bank of Canada 2024).

Key insights from the data

• NBFI assets in Canada declined by 4.3% in 2022 to $12.1 trillion. This represents the:
  • largest annual decline since the Bank began tracking NBFI assets in 2002
  • first time that assets have declined since 2011
  This drop largely reflects falling asset valuations across a broad range of markets, driven by many factors, including rising interest rates.
• The share of NBFI assets in the Canadian financial system fell to 60.5% from 62.9%. This is the lowest share since 2011. This decrease in the NBFI share of the financial system was due to:
  • the decline in NBFI assets
  • an 8.5% increase in assets at deposit-taking corporations
• Assets for the narrow measure of NBFI-which includes entities that engage in bank-like activities-fell by 9.1%. About 80% of the narrow measure of NBFI consists of investment funds that invest in credit products. The assets in these funds declined by 11.8% due to decreasing prices for credit products.

Definitions of non-bank financial intermediation

We follow the definitions for NBFI entities set out in the GMR (Figure 1) (Financial Stability Board 2023, page 3). The NBFI sector is composed of all non-bank financial entities that engage in some form of financial intermediation. These include pension funds, insurance corporations, financial auxiliaries and many other intermediaries referred to collectively as other financial intermediaries (OFIs).