FSB published the ninth annual report examining the global non-bank financial intermediation activity. The report presents global trends and risks from non-bank financial intermediation. It compares the size and trends of financial sectors, in aggregate and, across jurisdictions, primarily using the sectoral balance sheet data. The report covers data till the end of 2018 from 29 jurisdictions, which together represent over 80% of the global Gross Domestic Product. FSB focuses on the parts of non-bank financial intermediation that may pose bank-like financial stability risks and/or regulatory arbitrage (that is, the narrow measure of non-bank financial intermediation).
In addition to examining the trends and risks in global non-bank financial intermediation, the report assesses the interconnectedness among financial entities, both within and across borders. The report features case studies that discuss different aspects of non-bank financial intermediation in greater detail. They include flow and valuation effects in the investment fund sector, the role of non-bank financial institutions in providing financing to commercial real estate, and the role of investment funds in cross-border capital flows. The main findings from the 2019 monitoring exercise include the following:
- Total global financial assets grew by 1.4% to USD 378.9 trillion in 2018, driven largely by banks. Assets of insurance corporations and pension funds remained largely unchanged, while those of other financial intermediaries declined marginally as a result of stock market declines in late 2018 and, to a lesser extent, outflows from some of these entities. Other financial intermediaries include all financial institutions that are not central banks, banks, insurance corporations, pension funds, public financial institutions, or financial auxiliaries.
- The narrow measure of non-bank financial intermediation grew by 1.7%, to USD 50.9 trillion in 2018, significantly slower than the 2012-17 average annual growth rate of 8.5%. It now represents 13.6% of the total global financial assets. Entities engaged in securitization-based credit intermediation, such as securitization vehicles, remained unchanged in terms of nominal value in 2018, representing 9.3% of the narrow measure. Collective investment vehicles with features that make them susceptible to runs grew by 0.4% in 2018, much slower than the 11% average annual growth rate from 2012-17. At the end of 2018, such collective investment vehicles represented 72% of the narrow measure.
- Lending by other financial intermediaries continued to grow and their lending assets grew by 3.0% in 2018, largely driven by the euro area. However, banks remain the single largest source of credit intermediation.
- Interconnectedness between banks and other financial intermediaries through credit and funding relationships remains largely unchanged since 2016. Investment funds and money market funds remain the largest other financial intermediary providers of credit to banks.
Keywords: International, Banking, Insurance, Pensions, Securities, Shadow Banking, Financial Stability, NBFI, FSB
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