United States and the euro area now account for one-third of the global shadow banking assets.
The United States and the euro area now account for one-third of the global shadow banking assets that have climbed by $5 trillion to $75 trillion in 2013, the Financial Stability Board (FSB) has said in its latest report.
- Broadly, shadow banking refers to credit intermediation involving entities and activities outside the regular banking system
- The FSB, a global body promoting regulatory policies, also said these assets account for about 25% of the total financial assets
- The three top jurisdictions accounting for most of the shadow banking activity are: Euro area, UK and China
- The FSB has analysed assets of Other Financial Intermediaries — prone to shadow banking risks
The report found that shadow banking tends to take off in advanced economies as the following conditions are usually in place:
- Strict banking rules, low real interest rates, yield spreads
- Investors searching for higher returns
- Large demand for assets from institutions