Exposures of the banking sector to the shadow-banking sector and misconduct (i.e. misselling of financial products, market manipulation, rule completion breaches or money laundering) require that banking, insurance, market, and other regulators work closely together to develop coordinated tools to address macro-prudential risks. This joint effort is, however, at an early stage, given the diversity of mandates and governance structures among regulators.
At the same time, we have to keep an eye on a gradual increase in long-term interest rates in the United States, given the robust economic growth, an expansive deficit funded fiscal policy, and the Federal Reserve’s exit from the securities markets.