Key Takeaways
- • MFA submitted a formal comment letter to the European Commission urging support for nonbank financial intermediaries (NBFIs) as a critical component of EU competitiveness and capital formation strategy.
- • NBFIs, including private credit funds, now account for approximately 25% of credit to non-financial corporations in the EU, positioning them as essential complements to traditional banking channels.
- • MFA Chief Advocacy Officer Jillien Flores emphasized that private credit and nonbank lenders provide long-term, flexible financing that banks are constrained from holding on balance sheets, thereby expanding access to capital and supporting job creation.
- • The organization called for regulatory improvements including enhanced supervisory data quality, elimination of duplicative reporting requirements, and carefully calibrated stress-testing frameworks that reflect the distinct risk profiles of NBFIs rather than applying banking-sector metrics.
- • MFA warned that misleading risk metrics and overly stringent regulatory requirements could unnecessarily limit NBFI capital provision to the real economy, undermining the resilience benefits that diverse financing channels provide to the financial system.
Summary
The Managed Funds Association (MFA) has formally urged the European Commission to strengthen EU competitiveness by fostering a more diverse financial system that includes robust nonbank financing channels. In a comment letter submitted to Brussels policymakers, MFA emphasized that alternative sources of capital are essential to achieving the European Union's Savings and Investments Union objectives and driving economic dynamism across member states.
According to Jillien Flores, MFA's Chief Advocacy Officer, the EU's international competitiveness fundamentally depends on a financial system capable of efficiently connecting capital with businesses through multiple channels. Flores stressed that private credit funds and other nonbank lenders expand and diversify access to financing, support job creation, and strengthen overall economic growth. The advocacy position reflects growing recognition of NBFIs' market significance: these intermediaries now provide roughly a quarter of all credit to non-financial corporations across the EU, functioning as critical complements to traditional bank lending.
MFA highlighted a key structural advantage of the NBFI ecosystem: private credit managers provide long-term, flexible financing arrangements that banks are operationally and regulatory constrained from maintaining on their balance sheets. This complementary relationship simultaneously strengthens banking-system resilience by reducing concentrated credit exposure while expanding capital access across the broader economy. The organization further noted that strong partnerships between banks and private credit managers help mitigate systemic risks while broadening financing pathways for businesses of all sizes.
Beyond advocating for regulatory support, MFA urged policymakers to address specific supervisory and reporting deficiencies. The organization called for improved data quality in regulatory metrics, elimination of duplicative or misleading reporting requirements, and stress-testing frameworks specifically calibrated to reflect the distinct structural and risk characteristics of NBFIs. MFA cautioned that applying banking-sector assumptions to nonbank intermediaries can overstate risk exposures and distort regulators' understanding of market dynamics, ultimately creating unnecessary compliance costs that constrain real-economy financing.
According to Jillien Flores, MFA's Chief Advocacy Officer, the EU's international competitiveness fundamentally depends on a financial system capable of efficiently connecting capital with businesses through multiple channels. Flores stressed that private credit funds and other nonbank lenders expand and diversify access to financing, support job creation, and strengthen overall economic growth. The advocacy position reflects growing recognition of NBFIs' market significance: these intermediaries now provide roughly a quarter of all credit to non-financial corporations across the EU, functioning as critical complements to traditional bank lending.
MFA highlighted a key structural advantage of the NBFI ecosystem: private credit managers provide long-term, flexible financing arrangements that banks are operationally and regulatory constrained from maintaining on their balance sheets. This complementary relationship simultaneously strengthens banking-system resilience by reducing concentrated credit exposure while expanding capital access across the broader economy. The organization further noted that strong partnerships between banks and private credit managers help mitigate systemic risks while broadening financing pathways for businesses of all sizes.
Beyond advocating for regulatory support, MFA urged policymakers to address specific supervisory and reporting deficiencies. The organization called for improved data quality in regulatory metrics, elimination of duplicative or misleading reporting requirements, and stress-testing frameworks specifically calibrated to reflect the distinct structural and risk characteristics of NBFIs. MFA cautioned that applying banking-sector assumptions to nonbank intermediaries can overstate risk exposures and distort regulators' understanding of market dynamics, ultimately creating unnecessary compliance costs that constrain real-economy financing.
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