20 January 2020

IPE: Pension funds increase slice of lending market as shadow banking slows

In its Global Monitoring Report on Non-Bank Financial Intermediation 2019 published, the Financial Stability Board (FSB) said non-bank financial intermediation (NBFI) – previously called shadow banking – grew by just 1.7% to $50.9trn (€45.9trn) in 2018, according to the board’s narrow measure.

The measure includes non-bank financial institutions doing credit business seen as possibly posing bank-like financial stability risks.

The FSB’s annual monitoring exercise is designed to assess global trends and risks from NBFI, and part of its efforts to boost the sector’s resilience.

The 1.7% growth is significantly slower than the sector’s 2012-17 average annual growth rate of 8.5%, according to the report, which says NBFI now makes up 13.6% of total global financial assets.

In addition, the FSB reported that collective investment vehicles with features that make them susceptible to runs – a group whose assets make 72% of the narrow measure – grew by 0.4% in 2018, much slower than the group’s average annual growth rate over the previous five years of 11%.

Klaas Knot, chair of the FSB Standing Committee on Assessment of Vulnerabilities, said: “Non-banks play an increasingly important role in the global financial system.”

He said the FSB’s monitoring report provided a significant resource for authorities to assess trends and risks from NBFI.

“Such information is essential for a forward-looking, system-wide oversight framework,” he said.

The detailed and comprehensive set of international data has been produced at a time when macroprudential authorities such as the International Monetary Fund, the European Central Bank and the Bank of England, have been arguing that asset management activities are becoming systemically more risky.

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Global Monitoring Report on Non-Bank Financial Intermediation 2019

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