Credit and financial businesses outside the traditional banking industry are on the rise worldwide. The shadow banking sector grew in 2017 by 8.5 percent to a volume of $ 51.6 trillion, as the Financial Stability Board (FSB) announced yesterday in Basel. Newer data are not yet available.
The financial sector includes, among others, hedge and money market funds, alternative investment funds and specialized exchange traders. The FSB, which is testing the international financial system for vulnerabilities on behalf of the Group of the 20 most important industrial and emerging countries, analyzed data from 29 states and territories in its report. Together they account for over 80 percent of global economic output.
Share of such companies at record levels
The share of such companies in the global financial system is now the largest ever recorded, said the Dutch central bank chief Klaas Knot. He advised authorities to remain vigilant and address emerging stability risks. The importance of shadow banks has steadily increased since the financial crisis. Such firms are considered to be more risky compared to traditional financial institutions. Among other things, they play an increasingly important role in the risky high-yield credit business. Critics have long been calling for stronger regulation of this part of the financial sector as well.
Shadow banks in the US accounted for approximately $ 14.9 trillion in assets at the end of 2017. The country remained the leader in the sector with a share of 28.9 percent. Eight euro countries – including Germany, France and Italy – came to $ 11.8 trillion, a 23 percent share. In third place comes China (16 percent) and then the tax haven Cayman Islands (10.4 percent). Only in the Netherlands did the sector shrink slightly in 2017.
