The European Central Bank (ECB) has published a working paper developing an index of its public communication on non-bank financial intermediaries (NBFIs). The analysis finds a predominantly negative tone that has become more negative over time, particularly since the global financial crisis. Concerns about financial stability and the need for stronger regulation outweigh positive references to the sector’s contribution to financing and market functioning. Negative sentiment centers on liquidity and leverage risks and the potential for connections with banks to transmit financial shocks. Concerns about monetary policy transmission and gaps in monitoring data also feature, while more recent negative references address crypto-assets and decentralized finance. Positive sentiment reflects contributions to credit supply, financial innovation and market integration. An improvement in 2014–2015 coincided with the implementation of regulatory reforms, as communication shifted from calls for regulation toward references to safeguards already in place. The index draws on 2,830 speeches covering nearly three decades. A large language model trained on 1,300 manually labeled sentences classifies references to NBFIs as positive, negative or neutral. Alternative models and aggregation methods produce similar patterns. The index and labeled dataset are available to researchers upon request.
ECB study finds increasingly negative tone toward non-bank finance in its speeches
A European Central Bank working paper introduces a machine learning index showing that its speeches about non-bank financial intermediaries have become increasingly negative, especially since the global financial crisis. Financial stability risks and calls for stronger regulation dominate, although positive references recognize the sector’s financing and market integration benefits. The index and manually labeled dataset are available to researchers upon request.