Weekly Global News Wrap: US Fed, shadow banks on collision course; Banks toughen lending even as demand falls

And France suspends Morgan Stanley from some treasury bond deals.

From Bloomberg

The Federal Reserve and other central banks are heading for a collision with shadow lenders, even as policymakers struggle to reopen their economies.

They’ve launched a review of what went wrong with markets in March, and they have been focusing on loosely regulated money market and hedge funds, mortgage originators and other entities. Already, some watchdogs have pointed to highly leveraged trades involving US Treasuries as one source of the turmoil.

Non-banks are marshaling their lobbyists in Washington to argue that casting blame on the industry is misplaced. A point in their favor is that unlike Wall Street banks a decade ago, shadow lenders didn’t cause the recent meltdown.

From CNBC

Banks are tightening lending standards across the board even as they’re being urged to get money to those who have been hit by the pandemic, according to a Federal Reserve survey.

From commercial real estate to credit cards and autos, institutions are getting tougher on giving out money compared with the second quarter, even though demand also has decreased across most categories.

The banks further cited weaker capital positions, less competition and worries over increased regulatory burdens. At the same time, demand for commercial and industrial loans ebbed. Except for residential real estate, demand fell for all other forms of consumer debt.

From Reuters

The French state treasury has suspended Morgan Stanley from certain French treasury bond deals for three months, citing problems it had with the US investment bank’s execution of some past deals.

The Agence France Tresor (AFT) said the suspension arose after the June 2015 execution of transactions that seriously affected the liquidity of the French sovereign bond market and a failure by Morgan Stanley to disclose an investigation by the French AMF watchdog into those transactions.

Morgan Stanley said it had taken note of the AFT’s decision, adding that it was working on remedial measures and hoped to regain its primary dealership status with the French state treasury as soon as possible.

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