Specifically, this can lead to “fire sale” effects that may affect broader financial stability—which occurs when banks that fund long-term or illiquid assets with short-term deposits from financial intermediaries like pension funds and money market mutual funds need to rapidly sell less-liquid assets to maintain their operations.
Outside of the G-SIB surcharge framework, the Board has employed a measure of nonbank activities in certain rulemakings. These activities, which are conducted outside of a regulated depository institution, represent another source of complexity for large banks. For example, some nonbank entities engage in complex trading that is not permitted in depository institutions because of their risk.