March 05, 2018

FSB published the Global Shadow Banking Monitoring Report for 2017. The report presents results of the seventh annual monitoring exercise of FSB to assess global trends and risks from shadow banking activities. The monitoring exercise adopts an activity-based approach, focusing on the parts of the non-bank financial sector that perform economic functions giving rise to financial stability risks from shadow banking.

The report presents a comparative macro-mapping perspective of all sectors in the financial system, including central banks, banks, public financial institutions, insurance corporations, pension funds, other financial intermdiaries (OFIs), and financial auxiliaries. It assesses the interconnectedness between non-bank financial entities and banks, along with the interconnectedness among non-bank financial entities, based on the data collected for this monitoring exercise. The report also discusses the narrow measure based on the activities that certain non-bank financial entities undertake and classifies the activities into the five economic functions developed by FSB. Finally, the report assesses the potential risks posed by these entities and their activities. The key findings from the 2017 monitoring exercise are as follows:

  • The activity-based, narrow measure of shadow banking grew by 7.6% in 2016 to USD 45.2 trillion for the 29 jurisdictions. 
  • Collective investment vehicles with features that make them susceptible to runs, which represent 72% of the narrow measure, grew by 11% in 2016.
  • The assets of market intermediaries that depend on short-term funding or secured funding of client assets declined by 3%. These intermediaries accounted for 8% of the narrow measure by the end of 2016. 
  • The assets of non-bank financial entities engaged in loan provision that is dependent on short-term funding, such as finance companies, shrank by almost 4% in 2016, to 6% of the narrow measure. 
  • In 2016, the wider OFI aggregate, grew by 8% to USD 99 trillion in 21 jurisdictions and the euro area, faster than banks, insurance corporations, and pension funds. OFI assets now represent 30% of the financial assets, the highest level since at least 2002.

The 2017 monitoring exercise covers data up to the end of 2016 from 29 jurisdictions, including Luxembourg for the first time. These jurisdictions represent over 80% of the global GDP. For the first time, the report also assesses the involvement of non-bank financial entities in China in credit intermediation that may pose financial stability risks from shadow banking, such as maturity/liquidity mismatches and leverage. 

 

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Keywords: International, Banking, Shadow Banking, Financial Stability Risks, Monitoring, FSB

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