The Global Shadow Banking Monitoring Report 2016 published today by the Financial Stability Board shows that shadow banking is growing, up 3.2% over the previous year and equal to 13% of financial system assets. Shadow banking is broadly described as the carrying out of lending and other financial activities by institutions that are not banks.
Sixth annual exercise
The report presents the results of the FSB’s sixth annual monitoring exercise to assess global trends and risks in the shadow banking system, reflecting data up to the end of 2015. It covers 28 jurisdictions, including Belgium and the Cayman Islands for the first time. These together account for about 80 percent of global gross domestic product.
Other main findings
- Credit intermediation associated with collective investment vehicles (CIVs) comprised 65 percent of the narrow measure of shadow banking
- This has grown by around 10 percent on average over the past four years
- Non-bank financial entities dependent on short-term funding or secured funding of client assets grew by 2.5 percent in 2015
In some jurisdictions, finance companies tended to have relatively high leverage and maturity transformation. This makes them relatively more susceptible to rollover risk during periods of market stress.
Mark Carney says
Mark Carney, chair of the FSB as well as governor of the Bank of England, said: “Market-based finance provides important diversification of the funding sources which support the real economy.
"The enhanced and co-ordinated system-wide monitoring by authorities continues to improve our understanding of non-bank financial activities and risks to the financial system.
"This helps to inform our judgment on appropriate policy responses as we transform shadow banking into resilient market-based finance.”