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This year, the FSB continued to refine the shadow banking measure to produce an estimate that more tightly focuses on shadow banking risks, narrowing down the broad MUNFI estimate by filtering out entities that are not part of a credit intermediation chain and those that are prudentially consolidated into a banking group.
By absolute size, advanced economies have the largest shadow banking sectors, while emerging market jurisdictions recorded the fastest growth rates (albeit from a relatively small base). While the non-bank financial system may contribute to financial deepening, careful monitoring is still required to detect any increases in systemic risk factors (e.g. maturity and liquidity transformation, and leverage) that could arise from the rapid expansion of credit provided by the non-bank sector.
Going forward, the FSB's monitoring will benefit from further improvement in data availability and granularity which are necessary for authorities to be able to adequately capture the magnitude and nature of risks in the shadow banking system. In future monitoring reports, the ongoing work to narrow down the estimate of the shadow banking sector will benefit from the results of the information-sharing exercise on shadow banking entities and activities, which is part of the high-level Policy Framework for Strengthening Oversight and Regulation of Shadow Banking Entities, the initial round of which commenced this year.
Mark Carney, Chairman of the FSB, said, "The system-wide monitoring of shadow banking is a core element of the FSB's work to strengthen the oversight and regulation of shadow banking in order to transform it into a transparent, resilient, sustainable source of market-based financing for real economies. To this end, the FSB launched in 2011 the shadow banking annual monitoring exercise, which aims to identify and measure potential sources of systemic risks beyond the current bounds of prudential regulation. The progressive refinements of this exercise have sharpened the risk monitoring capabilities not only of the FSB but also of national and regional authorities".
Agustin Carstens, Chairman of the FSB Standing Committee on Assessment of Vulnerabilities, said: "The global regulatory community has acted decisively since the crisis to strengthen the core of the financial system. As a part of this work, we recognise that risks can migrate outside of the core and as a result the FSB's shadow banking monitoring exercise is of the utmost importance. Over time, further improvements in the scope, data availability and granularity are needed to comprehensively capture the global shadow banking system. In this regard, additional data sources such as the contributions of the Regional Consultative Groups (RCGs) to widen country coverage are helpful to fill potential gaps in the current monitoring exercise".
Full Global Shadow Banking Monitoring Report