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