The two key principles for prudential regulation of nonbanks when it is warranted, are simple: First, we should be attentive to solvency and liquidity; second, we should recognize that the financial system will change over time, and thus close monitoring and analysis of the system are essential. Insolvency and illiquidity are classic financial stability concerns.
We have the third largest funds sector in the world. To give you a sense of scale, by the end of 2021, there were nearly 10,000 such entities, up from about 6,000 in 2016. In the same period, asset values of these entities increased from approximately € trillion to € trillion. I will return to the need for more regulation of non-banks later.