The European asset management industry plays a vital role in Europe’s economy. Taken together, investment funds, life insurance and occupational pension funds manage over €10 trillion. The asset management industry is also important as a driver for the integrity and efficiency of the European financial market. It accounts for a significant share of trading in equities, bonds and derivative instruments in Europe. Moreover, the asset management industry has taken full advantage of the elimination of currency risk (within the euro area) and regulatory restrictions to rebalance portfolios on a pan-European basis.
A note on shadow banking (see also further articles under Banking and Securities)
Shadow banking is the system of credit intermediation that involves entities and activities that are outside the regular banking system, and thus are not regulated like banks. Shadow banking entities operate outside the regular banking system, and yet engage in the following bank-like activities: accepting funding with deposit-like characteristics; performing maturity and/or liquidity transformation; undergoing credit risk transfer; and using direct or indirect financial leverage.
Shadow banking activities are those that could act as important sources of funding for non-bank entities. These activities include securitisation, securities lending and repurchase transactions ("repo").
Shadow banking entities include i.a.: Special purpose entities which perform liquidity and/or maturity transformation, e.g. ABCP, SIV, SPV; Money Market Funds (MMFs) and other types of investment funds or products with deposit-like characteristics; and investment funds that provide credit or are leveraged, including Exchange Traded Funds (ETFs).
For further information, see Green Paper FAQs, 19.3.12