businessman searching with binoculars

The shadow banking system — and money market funds in particular — could be the first targets for post-pandemic reform from global regulators.

Ahead of its meeting with finance ministers and central bank governors, the Financial Stability Board (FSB) set out its priorities for the year ahead, which focus on addressing the fallout from the disruption caused by Covid-19, and particularly the resilience of non-bank financial intermediation.

In addition to “examining and addressing specific risk factors that contributed to amplification of the March 2020 market turmoil,” the FSB will also focus on improving policymakers’ understanding of the systemic risks posed by shadow banking — and possible measures to address those risks.

“As part of this work, the FSB will deliver policy proposals to enhance the resilience of money market funds in July for public consultation,” the group said.

The FSB also said that it will produce a report on the factors needed for an “orderly unwinding” of the unprecedented government support measures that were introduced to combat the economic and financial market effects of the pandemic.

The FSB’s other priorities for the coming year include evaluating the “too-big-to-fail” reforms for banks that were adopted in the wake of the last major financial crisis, improving efficiency and access in cross-border payments and updating the evolution of regulatory approaches to global stablecoins.

The FSB also said it will continue to address cybersecurity concerns, work with other global standards setters on enhanced standards for climate-related risks and seek a smooth transition from LIBOR to new financial benchmarks by the end of 2021.