BIS annual report pleads for tighter rules in fintech

The introduction of macroprudential policy requiring banks to build up separate countercyclical buffers of capital if credit markets narrow down was a core crisis-era innovation. The buffers can be released if loans begin turning sour and maintain resilience of the financial system to shocks - a departure from the traditional microprudential focus on the stability of individual banks.

The Bank for International Settlements, a forum for the several world central banks, has announced in its annual report that macroprudential tools devised so far might still not be effective enough in dealing with risks from other financiers, such asset management funds.

These funds are known as shadow banks because they also offer credit. The business has grown significantly since the crisis as more tightly regulated banks rein in lending to ease the capital charge burden.

Existing regulation of asset management was geared mainly towards soundness of individual funds and consumer protection, and failed to fully incorporate how actions by one fund could affect others, according to the Bank for International Settlements report.