Fund managers are also concerned. A systemic credit event poses the biggest threat to global markets, and the most likely source of one is US shadow banking, according to a survey of investors published last week by Bank of America Corp.

The US government’s top financial regulators signaled in February that they would consider whether any nonbank firms merit tougher oversight as systemically important institutions. 

The Financial Stability Oversight Council will put “nonbank financial intermediation” back on the table as a priority for 2023, according to a statement from the Treasury Department. The Federal Reserve, the Federal Deposit Insurance Corp. and the Financial Stability Board declined to comment for this story. 

European Central Bank Vice President Luis de Guindos warned in an interview with Business Post published on the ECB website Sunday that nonbanks “took a lot of risks” during the era of low interest rates and potential vulnerabilities “can come to the surface” as monetary policy changes. 

Eoin Treacy's view

It has been my view for at least the last 2 years that the epicentre of risk resides in private markets. What does that mean? It was where leverage was focused in the bull market and where valuations have increased the most. It is therefore the most likely to experience stress as liquidity tightens. Trouble within the sector is also likely to be the catalyst for central bank easing as they move to forestall the risk of a deep recession.