The assets of non-bank financial intermediaries grew by $5 trillion in 2012 to reach $71 trillion, according to the Financial Stability Board’s (FSB’s) third annual Global Shadow Banking Monitoring Report.
It also found that non-bank financial intermediaries, which include money market funds, 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 crisis.
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.
But the global growth trend of non-bank financial intermediaries masks considerable differences across jurisdictions, the report said. In general, non-bank financial intermediaries form a larger proportion of domestic financial systems in advanced economies than in emerging markets.
Nevertheless, 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%. They were China, Argentina, India and South Africa. This rapid growth is from a relatively low base and, in part, reflects financial deepening in these jurisdictions.
The FSB’s report includes data from 25 jurisdictions and the euro area as a whole.
Together these jurisdictions represent about 80% of global GDP and 90% of global financial system assets. For the first time, the report also includes estimates from a hedge fund survey by the International Organization of Securities Commissions. The assets of insurance companies, pension funds and public financial institutions are excluded from the research.
In August, the FSB published policy recommendations to strengthen oversight and regulation of the shadow banking industry in order to address risks to financial stability.
Mark Carney, chairman of the FSB, said: “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.”
Agustín Carstens, chairman of the FSB Standing Committee on Assessment of Vulnerabilities, said: “Improving bank regulation is not enough to fully address the weaknesses of the financial system revealed by the crisis.”
Sally Percy is editor of The Treasurer