The Financial Stability Board (FSB) published its second annual Global Shadow Banking Monitoring Report. The 2012 Monitoring Report has broadened its coverage to include 25 jurisdictions (all 24 FSB member jurisdictions and Chile), compared with 11 jurisdictions in 2011, and includes analyses on interconnectedness between banks and non-bank financial entities as well as on a specific non-bank financial subsector, namely finance companies.

The main findings are:

  • Non-bank financial intermediation grew rapidly before the crisis (in parallel with the regular banking system), from an estimated $26 trillion in 2002 to $62 trillion in 2007. It has continued to increase since, although at a slower pace, to $67 trillion at end 2011.

  • There is considerable diversity in the relative size, composition and growth of the non-bank financial intermediaries across jurisdictions. For example, the size of the shadow banking system continues to be large relative to the regular banking system in the U.S. and in a number of other jurisdictions. Seventeen jurisdictions out of 25 saw an increase in non-bank financial intermediaries since the crisis; half of these jurisdictions are emerging markets and developing economies undergoing financial deepening.

  • Data granularity is improving, with the share of unidentified non-bank financial intermediaries within overall non-bank intermediation falling from 36% in 2010 to 18% in 2011. However, further improvements are needed in jurisdictions that still lack granular data to adequately capture the magnitude and nature of risks in the shadow banking system.

    The FSB plans to complement the monitoring exercise next year by obtaining more granular data on assets and liabilities as well as expanding activity-based and risk-based monitoring. Enhanced data reporting and disclosure requirements as recommended in the FSB’s consultative documents published will be essential to provide the necessary basis for such an enriched monitoring.

    To read the full FSB press, click here.