NBFIMonitor

No8/June2023

EUNon-bankFinancial

IntermediationRiskMonitor2023

ESRB

EuropeansystemicRiskBoard

EuropeansystemofFinancialsupervision

EUNon-bankFinancialIntermediationRiskMonitor2022No8/June2023Contents

1

Contents

1Executivesummary2

2Overview6

2.1Developmentsinmainaggregates7

2.2Overviewofrisksandvulnerabilities10

2.3Engagementincertainriskyactivities15

2.4RecentdevelopmentsintheEUpolicyframework19

Box1FinancialStabilityBoard’sworkoncrypto-assetsandopen-ended

funds20

3Specialfeatures23

3.1Stressassociatedwithliability-driveninvestmentstrategies23

3.2Vulnerabilitiesincrypto-assetsandrelatedintermediaries37

4Entity-basedmonitoring44

4.1Investmentfunds44

4.2Otherfinancialinstitutions47

5Crypto-assets,centralisedfinanceanddecentralisedfinance50

Box2TheFTXcollapse:mainfactsandlessonslearnt52

6Activity-basedmonitoring55

6.1Derivatives55

6.2Securitiesfinancingtransactions58

6.3Securitisation60

Box3Commercialrealestatecollateralloanobligations62

Annexes64

Imprintandacknowledgements65

EUNon-bankFinancialIntermediationRiskMonitor2022No8/June2023Executivesummary

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1Executivesummary

Thisreportconsidersthemainrisksandvulnerabilitiesassociatedwithinvestmentfundsandotherfinancialinstitutions(OFIs)in2022;italsoextendsthemonitoringuniverseto

crypto-assetsandassociatedintermediaries.InJune2022theESRBidentifiedprioritiesforfutureanalysisofthecryptoecosystemfromafinancialstabilityperspective,includingregularriskmonitoringintheNBFIMonitor.Althoughthecryptoecosystemissmallandexposedtocertain

risksthatareuniquetoit,businessmodelsofanumberofcrypto-assetintermediariesresemblethoseofregulatedfinancialinstitutions.Thesebusinessestendtoofferservicessuchascrypto-assettrading,investing,lendingandborrowing.Accordingly,theyengageinessentiallythesameactivitiesastraditionalfinancialactors,i.e.creditintermediation,liquidityandmaturity

transformationinadditiontousingleverage.Crypto-assetsandassociatedintermediariesprovidefinancialintermediationandcanbeexposedtothesamevulnerabilitiesandfinancialrisksasthetraditionalfinancialsectorwhileremaininglargelyunregulated.Themonitoringuniverseofthe

reporthasbeenextendedaccordingly:Alongsidetraditionalnon-bankintermediariessuchas

investmentfundsandOFIs,itnowalsoincludesstablecoins,centralisedfinance(CeFi)platformsanddecentralisedfinance(DeFi)protocols.Thecut-offdateforthereportwas31December2022.ItthereforedoesnotcovertheperiodinMarch2023thatsawthefailureofthreeUSbanks,relatedadversedevelopmentsinthecrypto-assetecosystemandfurtherpressureontheEuropeanandUSbankingsystems.

In2022riskstothestabilityoftheEUfinancialsystemincreasedduetorisinggeopoliticaltensions,higher-than-expectedinflationandtighteningfinancialconditions.InSeptember

2022theESRBissueditsfirstgeneralwarningtoreflecttheseheightenedrisks.

1

Againstthis

backdrop,totalassetsofEUinvestmentfundsfellby11%in2022.Thiswasaccountedformainlybyvaluationeffectsreflectingfallsinequityandbondmarkets.Theotherfinancialinstitutions(OFI)

sectordeclinedby2%.Non-bankcredit–i.e.financingprovidedbyinvestmentfundsandOFIs

throughloansanddebtsecurities–grantedtoEUnon-financialcorporatesincreasedslightlyandattheendof2022stoodat20%ofexternaldebtfundingfor2022.Crypto-assetsandtheirassociatedintermediariescameunderstressduringtheyear.Thisincludedcollapsesofseverallargeactors,aswellasabroad-baseddropincrypto-assetvaluationinthesecondhalfoftheyear.Thesizeoftheglobalcryptoecosystemremainssmallcomparedwithtraditionalnon-banks.Thecombined

valueofcrypto-assetswasestimatedatlessthanUSD1trillion(€930billion),comparedwithcombinedassetsofEUinvestmentfundsandOFIstotalling€41.3trillion.

Thisreportconsidersstructuralvulnerabilitiesandcyclicalrisksfacinginvestmentfunds,

OFIsandcryptointermediaries.Despiteachallengingenvironmentandpocketsofvulnerabilities,investmentfundsandOFIsprovedresilientin2022.Conversely,certainintermediariesinthecryptoecosystemcollapsedwhenriskscrystallised.Thisyear’sreportfocusesonseveralrisksand

vulnerabilities(twomiddlepanelsinFigure1):

1See

WarningoftheEuropeanSystemicRiskBoardof22September2022onvulnerabilitiesintheUnionfinancial

system

(ESRB/2022/7)2022/C423/01,(OJC423,7.11.2022).

First,abroad-basedeconomicslowdownandtighteningfinancialconditionscouldincreasecreditrisk.Thisisparticularlyrelevantforinvestmentfundsexposedtolow-ratedbondsandloans,

financialvehiclecorporationsengagedinsecuritisationandfinancialcorporationsengagedin

lending.Materialisationofcreditriskcanleadtolosses,whichinthecaseofinvestmentfundscouldtranslatetolargeoutflowsandliquiditystrains.Highercreditriskparticularlyaffectsthecommercialrealestate(CRE)sector.Leveragedinvestors,includingnon-bankfinancialintermediaries,could

beforcedtosellCREproperties,addingdownwardpressureonpricesandexposingnon-mitigatedrisksassociatedwithaliquiditymismatchinrealestateinvestmentfunds.

Second,marketliquidityriskcouldputfurtherpressureonnon-bankfinancialintermediaries

engagedinliquiditytransformation.Severalindicatorspointedtothedeteriorationofliquidity

conditionsinEUbondmarketsin2022.Alongsidecyclicalliquidityrisk,challengespersistedduetostructuralchangesinliquidityprovisionanddemand.Thedevelopmentoftheinvestmentfund

industryoverthepastfewyears–including,inparticular,open-endedfundsofferingdaily

redemptions–hasresultedinahigherlikelihoodoflargeliquiditydemandsduetoinvestoroutflowsduringstressperiods.Inaddition,theriseinliquiditydemandsmayberelatedtothetransitionto

centralclearingaftertheglobalfinancialcrisis.Suchdynamicswereatplayinthecaseofequity

derivativesinMarch2020,inthecaseofenergyderivativesasofMarch2022andinthecaseof

interestratederivativesinSeptember2022.Similarly,thesharpdeclineincrypto-assetvaluation

wasamplifiedbyabroad-baseddeclineincollateralvalues,triggeringtheunwindingofleveragedpositions.Structuraldevelopmentsthatmightnegativelyaffectliquidityprovision,especiallyintimesofstress,arerelatedtotheriseofelectronictradingandthemovementofbanksawayfroma

dealer-basedmodeltoabroker-basedmodel.

Third,excessiveuseofleveragecouldamplifyliquidityandmarketrisks,aswellasleadto

contagionandmagnifyshockstofinancialstability.Thisvulnerabilityappliestotraditionalnon-bankentitiesincludedinthemonitoringuniverseofthereportandtocryptointermediaries,asbothuseleverageandrelyoncollateral.Liquidityriskassociatedwiththeuseofleveragecrystallisedin

September2022,wheninvestmentfundsusingliability-driveninvestment(LDI)strategiesfacedlargecollateralrequestsinrepotransactionsandmargincallsininterestratederivatives(IRDs)

followingthesharpriseinUKgiltyields.AsLDIfundstriedtoselllargevolumesofgiltstoraisecash,marketpricesfellfurtherandliquiditydeterioratedabruptly.Againstthisbackdrop,theBankofEnglandintervenedinthegiltmarkettosafeguardfinancialstability.

2

Similarly,thecollapseofFTX–amajorintermediaryinthecryptoecosystem–waspartlyrelatedtotheuseofhigh

leverage.Astheuseofleverageincreasesinterconnectedness,associatedriskscanspreadto

otherintermediaries.Thisalsoappliesinprincipletothecryptoecosystem,notleastthrough

collateralchainsandreputationaleffects.However,risksoriginatingtherearecurrentlylesslikelytotransmittothetraditionalfinancialsystem,asexposuresremainlow.Risksassociatedwiththeuseofleveragemayalsobeamplifiedbylowmarketliquidity,asobservedinsomebondmarket

segmentsin2022.

Tocomplementthemonitoringsections,thisreportincludestwospecialfeatures.Thefirstspecialfeatureonstressrelatedtoliability-driveninvestment(LDI)strategiesprovidesinsightsintohowrisksassociatedwithliquidityandleverageactuallymaterialise.Tothisend,itusesregulatory

2Seealso

Risksfromleverage:howdidasmallcornerofthepensionsindustrythreatenfinancialstability??

speechbySarahBreeden,

7November2022.

EUNon-bankFinancialIntermediationRiskMonitor2022No8/June2023Executivesummary

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EUNon-bankFinancialIntermediationRiskMonitor2022No8/June2023Executivesummary

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datatoassesstheresilienceofEULDIfundstoasuddenriseinyields.Theanalysisindicatesthat,ifyieldsweretoriseby100or150basispoints,LDIfundswouldfacealiquidityshortfall,astheirliquiditybufferswouldnotbelargeenoughtocovermarginandadditionalcollateralrequests.Theywouldneedtoredeemmoneymarketfund(MMF)sharesand/orsellothersecurities,including

sovereignbonds,transmittingriskstootherpartsofthefinancialsystem.Thesecondspecial

featurefocusesonvulnerabilitiesofthecryptoecosystemthataresimilartothosepresentin

traditionalnon-bankfinancialintermediaries.Itconsidershowcrypto-assetsandassociated

intermediariesengageincreditintermediation,aswellasliquidityandmaturitytransformation,andalsotheiruseofleverageandinterconnectedness.

EUNon-bankFinancialIntermediationRiskMonitor2022No8/June2023Executivesummary

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Figure1

Summaryofmaintrendsandrisksinnon-bankfinancialintermediation

Modestdeclineinthemonitoringuniverse

?Valuationeffectsespeciallyforinvestmentfunds

?Outflowsfromfundsinthelastthreequartersof2022

?Modestincreaseinnon-bankcredittoNFCs

45

40

35

30

25

20

15

10

5

0

EUAuM(left-handscale)

EUgrowthrate(right-handscale)

35%30%25%20%15%10%5%0%-5%

AssetsundermanagementinEUinvestment

fundsandotherfinancialinstitutions(EUR

trillions)

Source:ECB.

200720102013201620192022

GrowthslowdownandliquidityconditionsweighonNBFI

?Qualityofbondfundholdingsremainsaconcern

?VulnerabilitiesinCREmightaffectNBFIandviceversa

?Structuralchangesinliquidityprovisionanddemand

50%

40%

30%

20%

10%

0%

Below-BBBandunrated

Shareofbelow-BBBandunratedbondsinbond

fundportfolio

Sources:ThomsonReutersLipper,ESMAand

Standard&Poor’s.

201420202022

Liquidityandmarketrisksrelatedtotheuseofleverage

?LDIepisodeemphasiseshow

liquidityandleverage-relatedriskscanariseandspillovertomarketsandMMFs

35

30

25

20

15

10

5

0

Collateralinrepos(left-handscale)

CollateralinIRDs(left-handscale)

Changesin30Yyields(right-handscale)

Estimatedcumulativeadditionalcollateral

request(EURbillions)andcumulativechangein

30-yearUKgovernmentyields(bp)

Sources:Bloomberg,SFTR,EMIR

160

140

120

100

80

60

40

20

0

23/0926/0927/0928/0929/0930/09

Risksrelatedtothecryptoecosystem

?Highvolatilityofcryptoassets

?Leverageandre-useofcollateral

?Liquidityriskforstablecoins

Bitcoin

Ethereum

TetherOthers

Crypto-assetmarketcapitalisation

(USDbillions)

Sources:CoinMarketCapESMA

3,500

3,000

2,500

2,000

1,500

1,000

500

0

201720182019202020212022

Source:ESRB.

EUNon-bankFinancialIntermediationRiskMonitor2022No8/June2023Overview

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2Overview

TheNBFIMonitor2023discussesthemainsystemicrisksandvulnerabilitiesassociatedwithinvestmentfundsandOFIswhilealsoprovidinganinitialassessmentofrisksinthecryptoecosystem.Thereportcoversthemaindevelopmentsin2022

3

andconsidersarangeofrisksandvulnerabilitiesassociatedwithfinancialintermediationoutsidethebankingsystem,

focusingonthoserelatedtoliquidityandmaturitytransformation,useofleverageand

interconnectedness.ThereportcoversallinvestmentfundsandOFIs.Italsocoverscrypto-assetsandassociatedintermediariesinsofarasthetypeoffinancialintermediationtheyprovideis

exposedtosimilarrisksandvulnerabilitiestothosefacedbythe‘traditional’non-bankfinancialsector.Insurancecompanies,pensionfundsandCCPsarenotincludedintheentity-based

monitoringofthereportperseduetothedifferingriskprofilesoftheirmainactivities.

4

As

investmentfundsandOFIsparticipateinarangeoffinancialmarkets–includingderivatives,

securitiesfinancingandsecuritisation–entity-basedmonitoringiscomplementedbyactivity-basedmonitoringtoprovideaholisticassessmentoffinancialstabilityrisks.ThiseditionoftheNBFI

Monitorintroducesdedicatedriskmonitoringofcrypto-assetsandtheirassociatedintermediaries.

Crypto-assetsandassociatedintermediariesmayengageintypesoffinancial

intermediationthatleadtosimilarvulnerabilitiesandexposethemtosimilarriskstothosecoveredinthisreport.Inparticular,crypto-assetandassociatedintermediariesmayundertake

creditintermediation,aswellasliquidityandmaturitytransformation,andusehighleverage,whichexposesthemtocertainrisks(seespecialfeatureinSection2.2).First,stablecoinsengagein

liquidityandmaturitytransformationandintendtomaintainastablevaluerelativetofiatcurrencies.Tosafeguardthispeg,theyreceivecashas(non-insured)‘deposits’andrelyonvarious

mechanismssuchasreinvestmentinlow-riskassetsforreserve-backedstablecoinsorautomatedissuanceandrepurchasesforalgorithmicstablecoins.Thisformofliquidityandmaturity

transformationissimilartothatperformedbymoneymarketfunds(MMFs),inparticularbyMMFs

usingconstantnetassetvaluation.Second,centralisedfinance(CeFi)–whichconsistsof

centralisedintermediarieswithinthecrypto-assetspace,suchaslendingandtradingplatforms

offeringservicesthatincludecustodyofassets,marginlendingandcollateralre-use–facilitates

liquidityandmaturitytransformationandprovidesleveragetoitsclients,includingthroughlong

collateralchainsthatcanbecostlytounwind.Third,decentralisedfinance(DeFi)–i.e.autonomousprotocolsthatperformfinancialfunctionsbasedonsmartcontracts–providesleverageandcreditthroughcollateralisedborrowing,whichmayresultintheautomaticliquidationofpositionswhen

thresholdsarebreachedandthusamplifyprocyclicality.Risksthataretypicalofthetraditional

financialsystemhaverepeatedlymaterialisedandmayberegardedasarootcauseoftheextremecyclicalityinherentincrypto-assets,aswellastheseriesofcollapsesamongitsintermediaries

during2022.Inadditiontotherisksandvulnerabilitiesthisreportfocuseson,crypto-assetsandassociatedintermediariesmaybesubjecttospecificriskssuchasoperationalvulnerabilitiesorweaknessintheconsensusmechanismsemployed

5

.Dataonthecryptoecosystemthatare

3Thereportmightalsorefertolesstimelyinformationduetodataavailability.

4KeyrisksanddevelopmentsintheEUinsuranceandoccupationalpensionssectorsareexaminedinEIOPAFinancialStabilityReports.Seeforinstance

FinancialStabilityReportDecember2022,

EIOPA,December2022.

5Foranoverview,see

Crypto-assetsandtheirrisksforfinancialstability,

ESMA,October2022.

providedinthereportshouldbeinterpretedwithcaution,astheyaregatheredforthemostpart

fromcommercialsources.Inaddition,estimatesareavailableonlyatthegloballevel,andnotatEUlevel,duetodatagaps.Toaccountfortheglobalnatureofthecryptoecosystem,estimatesare

providedinUSDthroughoutthereport.

TheNBFIMonitorisstructuredasfollows:TheremainderofSection1presentsthemost

importantchangesinmainaggregatesofthemonitoringuniverse,discussesitskeyrisksand

structuralvulnerabilitiesandassessesitsengagementincertainriskyactivities.Italsoprovidesabriefoverviewofrecentpolicydevelopmentsthatarerelevantfromafinancialstabilityperspective.Section2.1highlightseventsrelatedtotheUKgiltmarketturmoilandstressinLDIstrategiesin

ordertoprovidefurtherinsightintoleverageandliquidityriskinthenon-banksector.Section2.2discussesrisksandvulnerabilitiesassociatedwithfinancialintermediationperformedbythecryptoecosystem.Sections3and4exploreriskassessmentingreaterdetail,focusingonhowthekey

risksidentifiedinSection1mightaffect,orbeamplifiedby,themonitoringuniverseofthereport.Section5complementsthisbysheddingmorelightonsystemicrisksrelatedtoderivativemarkets,securitiesfinancingtransactionsandsecuritisation.Annexesprovidemoredetailedinformationonstatisticalclassificationsforinvestmentfundsandotherfinancialinstitutions,accordingtothe

EuropeanSystemofNationalandRegionalAccounts(ESA)

6

,aswellasadescriptionofbusinessmodelsofthemonitoringuniverseofthereportandastatisticaloverview.

2.1Developmentsinmainaggregates

Economicandfinancialsectorconditionsdeterioratedduringthereviewperiod,triggering

largefallsinassetprices.Overthereportingperiod,thewarinUkraineandabroaderincreaseingeopoliticaltensionsweighedongrowthandpushedupinflation.Assoaringenergyandfoodpricesraisedconcernsaboutpersistentinflation,theensuingmonetarypolicyresponsesofcentralbanks

ledtoatighteningoffinancialconditions.ThisenvironmentalsocontributedtoweakerEU

economicactivity,withrealGDPprojectedat3.3%in2022and0.3%in2023

7

.Uncertaintyaboutgrowthprospectsandmonetarypolicytriggereddeclinesinfinancialassetprices,increasedmarketvolatilityandloweredmarketliquidityinEuropeancorporateandsovereignbondmarkets.Recent

datareleasesthatpost-datethereviewperiodforthereport,however,pointtoamorefavourableoutlook:deceleratinginflationandthepossibilityofhigher-than-expectedeconomicactivityin2023(withthegrowthoutlookliftedto0.8%).

8

Thefallinassetpriceswasreflectedinamoderatedecreaseinthesizeofthemonitoring

universein2022.Astheeconomicoutlookdeterioratedandassetpricesdeclined,someofthe

growthseenin2021reversed.TotalassetsofEUinvestmentfundsandOFIsfellto€41.5trillionattheendof2022comparedwith€43.8trillionattheendof2021,butremainedabovethe€39.0

trillionmarkattheendof2020(Chart1panela).Thismainlyreflectedafallininvestmentfund

assetsundermanagement(AuM)causedbyvaluationlossesduring2022(ChartA5)andoutflowsfollowingthefirstquarteroftheyear.Valuationlossesinbondportfolioswereprimarilydrivenbyhighinterestratesensitivity.Therewasanincreaseinthecorrelationofreturnsacrossboth

6Formoreinformation,see

Europeansystemofaccounts(ESA)2010.

7Se

eEuropeanEconomicForecast,

Autumn2022,EuropeanCommission.

8See

EuropeanEconomicForecast,

Winter2023,EuropeanCommissionand

WorldEconomicOutlook,

IMF,April2023.

EUNon-bankFinancialIntermediationRiskMonitor2022No8/June2023Overview

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EUNon-bankFinancialIntermediationRiskMonitor2022No8/June2023Overview

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equitiesanddebtsecurities,affectingawiderangeofinvestmentfundcategories.Asaresult,netassetsofbothequityandbondfundsfellduring2022,withapproximately80%ofthedeclines

attributabletovaluationlosses.Similarly,thedeclineinassetsoftheEUOFIsectorwasrelatedtovaluationeffects.Overall,assetsofinvestmentfundsandOFIsaccountedfor39%oftheEuropeanfinancialsectorassets,comparedwith40%in2021(ChartA3).Whilethecombinedvalueof

crypto-assets(‘marketcapitalisation’)peakedatclosetoUSD3trillion(€2.6trillion)inNovember2021,themarketsubsequentlycontractedtolessthanUSD1trillion(€930billion,Chart1panelb)attheendof2022.

Chart1

Thesizeofthemonitoringuniversehasdeclinedduetonegativevaluationeffectsfor

investmentfunds,whilethecollapseofsomeentitiesinthecrypto-assetspacehasshakenmarketconfidence

a)AssetsundermanagementinEUandeuroareainvestmentfundsandotherfinancialinstitutions

(left-handscale:EURtrillions;right-handscale:annualgrowthratesinpercentages)

EUassetsundermanagement(left-handscale)

Euroareaassetsundermanagement(left-handscale)EUgrowthrate(right-handscale)

Euroareagrowthrate(right-handscale)

Euroareagrowthrate–transactions-based(right-handscale)

45

40

35

30

25

20

15

10

5

0

35%30%25%20%15%10%5%

0%

-5%-10%

20072009201120132015201720192021

b)Crypto-assetmarketcapitalisation(USDbillions)

Bitcoin

EthereumTether

Others

3,500

3,000

2,500

2,000

1,500

1,000

500

0

201720182019202020212022

Sources:ECBandESRBcalculations,CoinMarketCapandESMA.

Notes:InChart1panela,redandgreenlinesindicateannualgrowthratesbasedonchangesinoutstandingamounts.Thebluelineindicatestheannualeuroareagrowthratebasedontransactions,i.e.excludingtheimpactofexchangeratevariationsorotherrevaluationsandstatisticalreclassifications.

Againstthisbackdrop,investmentfundsandOFIsremainedanimportantsourceoffunding

toEUnon-financialcorporations(NFCs).Market-basedcredit,i.e.intermediatedviamarketsin

theformofdebtsecuritiesandnon-retainedsecuritisedloans(irrespectiveofthetypeofinstitutionthatprovidesfinancing)asopposedtoloanstypicallyoriginatedbybanks,declinedfrom21%to

19%oftotalexternalcredittoNFCsattheendof2022(Chart2panela).Thisreflectedtheimpactofmarked-to-marketvaluationondebtsecuritiesandincreasedcostoffundingfollowingthe

tighteningofmonetarypoliciesglobally,aswellasnetdebtsecuritiesissuanceturningnegative.Ontheotherhand,non-bankcredit,wheretheultimatelendersareinvestmentfundsandOFIs

(irrespectiveofthemodeoffinancingprovidedintheformofloansordebtsecurities),increased

EUNon-bankFinancialIntermediationRiskMonitor2022No8/June2023Overview

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slightlyandstoodat20%attheendof2022(Chart2panelb).In2022loansprovidedtoEUNFCsbyOFIsincreasedinnominalterms,whileloansprovidedbyinvestmentfundsdecreasedslightly.Bothmarket-basedandnon-bankcredithaveroughlydoubledsincetheGlobalFinancialCrisis.

Chart2

Afterasteadyincreaseoverthelastdecade,market-basedcredittoNFCsdeclinedin2022duetoflowandvaluationeffectsincreditmarkets

a)Market-basedcredittoEUNFCsb)Non-bankcredittoEUNFCs

(percentagesofNFCcreditfromfinancialinstitutions)(percentagesofNFCcreditfromfinancialinstitutions)

25%

20%

15%

10%

5%

0%

30%

25%

20%

15%

10%

5%

0%

Market-basedcredit

20

22

:ca

1

9%

20

08

:ca

.1

0%

990001020305060708091012131415161719202122

Non-bankcredit

20

22

:ca

.2

0%

2008:

ca

.11%

990001020305060708091012131415161719202122

Sources:ECBandESRBcalculations.

Notes:Market-basedcreditreflectstheshareofmarket-baseddebtfinance(debtsecuritiesandnon-retainedsecuritisedloans)relativetothetotalexternaldebtofeuroareaNFCs,irrespectiveofwhichsectorprovidedthecredit.Non-bankcreditreflectstherelativeshareofinvestmentfundsandOFIsinprovidingdebtfinancingtoeuroareaNFCscomparedwithcreditprovidedbyallfinancialinstitutions(thenon-bankfinancialsectorandbanks),irrespectiveofwhetherthatfinancingisprovidedintheformof

loansordebtsecurities.Thedarklinereflectsanaverageofthelightlines,whichinclude(dottedlineatthetop)orexclude

(dottedlineatthebottom)loansgrantedbyaresidualofOFIs.ThemethodologyissimilartodescribedinBox2,

“Financial

IntegrationandStructureintheEuroArea”,ECB,April2022,butinsurancecorporationsandpensionfundsareexcluded.

Linkagesbetweeninvestmentfunds,OFIsandthebankingsectordeclinedslightlyi