The system of “shadow banking,” blamed by some for aggravating the global financial crisis, grew to a new high of $67 trillion globally last year, a regulatory group said, calling for tighter control of the sector.
A report by the Financial Stability Board (FSB) appeared to confirm fears among policymakers that shadow banking is set to thrive, beyond the reach of a regulatory net tightening around traditional banks and banking activities. The FSB, a task force from the world’s top 20 economies, also called for greater regulatory control of shadow banking.
“The FSB is of the view that the authorities’ approach to shadow banking has to be a targeted one,” the group wrote in a report, noting the current lax regulation of the sector.
Officials at the European Commission in Brussels also see closer oversight of the sector as important in preventing a repeat of the financial crisis that has toppled banks over the past five years and rocked the euro zone.
The study by the FSB said shadow banking around the world more than doubled to $62 trillion in the five years to 2007 before the crisis struck.
But the size of the total system had grown to $67 trillion in 2011 — more than the total economic output of all the countries in the study.
The US had the largest shadow banking system, with assets of $23 trillion in 2011, followed by the euro area — with $22 trillion — and the UK — at $9 trillion.
‘Need to monitor the sector in India’
New Delhi: The FSB highlighted need to monitor shadow banking activities in India. "India and Indonesia stand out with annual growth rates of above 20% since 2007 which may require closer monitoring,” FSB said. PTI