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Roula Khalaf, Editor of the FT, selects her favourite stories in this weekly newsletter.

Once upon a time, banks were bigger than non-bank financial institutions (NBFIs). Those days are now a dim and distant memory. The blame (or credit) for this is usually laid at the door of regulators.

One justification for regulating banks much more heavily than NBFIs is that they matter more. Banks do different things (like take deposits) and can’t be allowed to fail. NBFIs – like mutual funds, pensions and insurance firms – can die without summoning the end of days. Or so one view goes.

Another perspective on NBFIs is that they are sneaky critters, which creep around regulatory perimeters and eat banks’ lunches. Think pesky private credit funds that lend to firms, mutual funds that buy corporate bonds, etc. In this characterisation, NBFIs will have to be rescued, from time to time, when they blow up.

In both worlds NBFIs sort of run in parallel with the banking system as an under-regulated little big brother. And at the very least they add diversification to the financial ecosystem. But do they? These are the questions tackled by Viral Acharya – former deputy governor of the Reserve Bank of India, and now of NYU – Nicola Cetorelli of the FRBNY, and Bruce Tuckman of NYU. Their answer became the keynote paper at a Riksbank conference last year we’ve only just landed upon (h/t Usama Polani).

Using new(ish) and enhanced financial accounts data for the United States, they find that — rather than NBFIs substituting for bank business — NBFI and bank businesses and risks are better seen as increasingly interwoven.

The authors run through a bunch of examples of this interdependence, which will be familiar to some regular readers. These range from the sale of $2.3bn of loans from PacWest to Ares via Barclays in the regional bank crisis of March 2023, Blackstone Private Credit Fund’s 19 secured credit commitment facilities, REITs’ use of bank credit lines as warehouse financing, European electricity producers’ derivative use, to the UK’s very own pensions LDI crisis.

They present their findings as a big ol’ table at the back of their paper, which we’ve recreated here:

Maybe you enjoyed that but if, like us, tables cause your eyes to glaze

Among west Texas oilmen, the lesser prairie-chicken is a subject that quickly raises hackles. 

The unusual-looking animal famed for its elaborate mating dance roams the scrubland of the vast Permian Basin — the epicentre of US oil production — and was listed as endangered last year. Its new status now restricts where, when and how oil can be drilled.

For the industry, the rights granted to the bird are emblematic of the regulatory onslaught it claims to have suffered at the hands of President Joe Biden, who executives believe will bring about the ruin of their sector.

“It’s death by 1,000 cuts,” says Steve Pruett, chief executive of Elevation Resources, sitting in his office in Midland, Texas. “It’s the worst presidency with regard to energy policy I’ve ever seen — and I’ve been involved in energy for 40 years, my entire career.”

After the regulatory bonfire of Donald Trump’s four years in office, Biden made tackling climate change a central priority for his administration and vowed to crack down on America’s oil and gas industry. He has brought in environmental rules that range from endangered species protections and a clampdown on methane leaks to restrictions on offshore leasing and the suspension of new licences for the multibillion-dollar terminals needed to liquefy American gas and ship it abroad.

To many Democratic voters, such restrictions are long overdue. But in Midland, the west Texas frontier town where George W Bush spent his childhood, they have made Biden an unpopular man. The city sits at the heart of the Permian, which at 6.1mn barrels a day pumps more than Opec powerhouses such as Kuwait, Iraq or the UAE — and has made the US the biggest oil producer in history.

With six months to go until the presidential election in November, energy policy has emerged as a key battleground between Biden and Trump. The former president is attempting to harness the discontent by telling voters in fossil fuel states that, if re-elected, he would adopt a policy of “drill, baby, drill”.

Yet the rhetoric of the two candidates belies an inconvenient truth for both: America’s oil and gas industry has flourished under Biden. At more than 13mn b/d, production is at record levels, exports of American hydrocarbons have surged and the scale of annual profits has been

A group of workers laid off from Anglo American sat drinking in the early morning sun outside a makeshift township bar in Ga-Puka, deep in South Africa’s platinum mining belt.

“The sad truth is that it’s us ordinary South Africans who are suffering. Government and the mine [shareholders] get rich, we are just thinking how we will survive,” said one, an engineering contractor, swigging from a can of beer.

The discovery in the 1920s of vast platinum reserves beneath the tranquil farmland north of Pretoria transformed the region. Today, job offers are scant for those relocated to the barren, sun-baked settlement of Ga-Puka.

While other platinum miners in the region have also slashed jobs, Anglo American Platinum, along with the LSE-listed miner’s iron ore unit Kumba, have come under the spotlight after BHP’s £31bn offer last month. The Australian miner’s unsolicited bid was conditional on Anglo demerging its Johannesburg-listed divisions.

A sharp decline in platinum group metal prices, used in everything from medical equipment to diesel car exhausts, has contributed to a 45 per cent fall in Amplats’ shares in the past year, with rising costs leading to a headcount reduction by almost a fifth.

The downturn in the platinum metals markets has come as South Africa’s mining industry has been embattled by power outages and crumbling infrastructure after years of government under-investment. Anglo’s journey from a South African corporate wealth creator to prey for a rival miner reflects the country’s own decline as a mining powerhouse, as well as the rising risks of doing business in the country.

“You can’t get away from the fact that South Africa is a very onerous environment for big mining companies in which to invest, let alone explore new resources,” said Michael Cardo, author of Harry Oppenheimer: Diamonds, Gold and Dynasty, a biography of the son of Anglo’s founder who chaired Anglo for 25 years.

“What’s under way now almost has the feeling of the sun setting on a corporate empire.”

Foreign investors last year perceived South Africa to be in the bottom 10 — lower than Mali and Burkina Faso — out of 62 mining jurisdictions, according to a survey from Canadian think-tank Fraser Institute.

Delays by the government in setting up industry basics such as a mining cadastre — a public

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Roula Khalaf, Editor of the FT, selects her favourite stories in this weekly newsletter.

Bonds issued by some of the world’s poorest countries have been the best performers in sovereign debt markets this year, shrugging off the impact of high US borrowing costs, which often spook investors in riskier economies.

Emerging market sovereign bonds denominated in foreign currencies — mainly the dollar — and holding a triple B “junk” rating or lower have delivered a 4.9 per cent total return for investors this year. That compares with a loss of 3.3 per cent for an index of US Treasury bonds.

The gains have come as the resilience of the global economy surprised investors, while higher commodity prices have benefited countries such as oil exporters Nigeria and Angola and copper producer Zambia. Meanwhile, support from lenders such as the IMF has helped those in debt distress or default such as Sri Lanka and Zambia.

“Emerging markets have done much better than anyone would have expected,” said David Hauner, head of global emerging markets fixed income strategy at Bank of America.

“Clearly the credit component of EM sovereign bonds has held up well because the fundamentals have been improving,” he added, referring to the premium investors demand to hold riskier debt rather than US Treasuries.

Higher bond yields in the US and Europe usually spell trouble for developing countries because capital is lured back to the improved returns on offer in home markets, and because the cost of refinancing dollar or euro-denominated debt increases.

This year investors have pulled close to $12bn from emerging market debt funds as they chase returns elsewhere, for instance in US high-yield debt funds, which have had net inflows of $2bn, according to JPMorgan analysts.

However, some investors believe these outflows are set to reverse, particularly if the outlook for US corporates worsens.

“As capital flows back into EM this should be supportive for the asset class. In contrast, the tide that has lifted the US high-yield market is on the wane,” said Grant Webster, co-head of emerging market and sovereign FX at asset manager Ninety One.

Resilience across emerging economies has come alongside progress on domestic reforms and restructuring talks in a number of countries.

Argentina’s bonds have been among the top performers, gaining 39 per cent year to date, as investors have welcomed a radical austerity package and deregulation by President Javier Milei.

Meanwhile, dollar bonds in Sri Lanka, Ghana