The Financial Stability Board (FSB) has published its third annual ‘Global Shadow Banking Monitoring Report’.
The report includes data from 25 jurisdictions and the euro area as a whole;
these jurisdictions represent about 80% of global gross domestic product (GDP)
and 90% of global financial system assets. For the first time the report also
incorporates estimates from a hedge fund survey by the International Organisation
of Securities Commissions (IOSCO).
The main findings of the FSB report are:
- On a broad estimate, the assets of non-bank financial intermediaries
(excluding those of insurance companies, pension funds and public financial
institutions) grew by US$5 trillion in 2012 to reach US$71 trillion.
- Non-bank financial intermediaries represent on average about 24% of
total financial assets, and are equivalent to about half of banking system
assets and 117% of GDP. These patterns have been relatively stable since the
- Non-bank financial intermediaries grew by 8.1% in 2012 (compared with
0.6% in 2011), partly as a result of a general increase in valuation of global
financial markets, while bank assets were relatively stable. The global growth
trend of non-bank financial intermediaries masks considerable differences
- In general, non-bank financial intermediaries form a larger proportion
of domestic financial systems in advanced economies than in emerging markets.
However, non-bank financial intermediaries in emerging market jurisdictions
have experienced strong growth. Four emerging market jurisdictions had 2012
growth rates for non-bank financial intermediation above 20%. This rapid growth
is from a relatively low base and in part reflects financial deepening in these
- In addition to the broad estimate of the size of non-bank financial
intermediaries, the report offers a first estimate of assets that more closely
relate to shadow banking activity in 20 jurisdictions for which more granular
data on non-bank financial intermediaries are available. This narrow estimate
filters out non-bank financial activities that have no direct relation to
credit intermediation or that are prudentially consolidated into banking
groups. Using these more granular data produces for these 20 jurisdictions a
narrower estimate of US$35 trillion, down from US$55 trillion using the broad
basis. Using this narrowed-down estimate, the growth rate of non-bank financial
intermediaries for this smaller sample was 2.9% in 2012.
In August the FSB published policy recommendations to strengthen
oversight and regulation of shadow banking. The objective is to address
bank-like risks to financial stability emerging outside the regular banking
system while not inhibiting sustainable non-bank financing models that do not
pose such risks.
Bank of England (BoE) governor Mark Carney, who is chairman
of the FSB, said, “Monitoring the shadow banking system is an essential part of
our work to strengthen the oversight and regulation of this sector. Our aim is
for shadow banking to deliver transparent and resilient market-based financing,
thus diversifying the sources of financing of our economies in a sustainable
way. The FSB will continue to improve its global monitoring exercise to
identify the financial stability risks posed by shadow banking as the result of
its use of leverage, maturity and liquidity transformation”.
Agustín Carstens, chairman of the FSB standing committee on assessment
of vulnerabilities, added: “Improving bank regulation is not enough to fully
address the weaknesses of the financial system revealed by the crisis. The
shadow banking system continues to transform and innovate. This annual
monitoring exercise aims to narrow in on new risks to the financial system, and
inform decisions on whether further measures are needed”.