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Home » Leveraging the non-bank sector – in good times and bad

Leveraging the non-bank sector – in good times and bad

Non-banks encompass a wide range of business models, including pension funds, insurers, hedge funds, and many others. The activities of these firms are vital for the financial health and growth of the UK economy.Therefore, making sure these firms are resilient and financially stable ensures they provide consumers and businesses with the services they need – in both good times and bad.Non-banks use leverage (borrowing to invest) to increase exposure, boost returns or hedge potential losses. This can be achieved in various ways, ranging from taking out loans to using complex derivatives. The use of leverage is an essential component of the deep and efficient capital markets that we have in the UK.In good times, this leverage provides extra liquidity to the system and helps maximise returns. But in periods of market stress, leverage that is poorly managed, concentrated, or hard to spot can raise instability. This is particularly true in markets that are core to the functioning of the rea  Read More