The post-crisis rise in shadow banking seems to have slowed down, according to a new report from the Financial Stability Board (FSB).
The global policy group reported that total worldwide financial assets grew by 1.4% to $378.9 trillion (all figures in U.S. dollars) in 2018, driven largely by banks.
The assets of all “other financial intermediaries” (OFI) — which include all financial institutions that are not central banks, banks, insurers, pension funds or public financial institutions — “declined marginally as a result of stock market declines in late 2018 and, to a lesser extent, outflows from some of these entities,” the report said.
The assets of a narrower set of non-bank financial intermediaries — which the FSB monitors for bank-like financial stability risks — rose by 1.7% during the year, slightly outpacing the global trend. This marked a significant slowdown from the 8.5% annual growth rate that prevailed among these firms from 2012 to 2017, the FSB said.
Additionally, the FSB reported that the assets of collective investment vehicles that are potentially susceptible to runs rose by only 0.4% during the year — down from 11% average annual growth for the previous five years.
Even with the slowing growth, shadow banking now represents 13.6% of total global financial assets, the FSB said, adding that it plans to strengthen its scrutiny of shadow banking risks this year.
“Non-banks play an increasingly important role in the global financial system,” noted Klaas Knot, chair of the FSB standing committee on assessment of vulnerabilities.
Shadow banks outpace traditional banks in Canada
Statistics Canada also published new data on non-bank financial intermediation on Monday.
The StatsCan data features estimates for non-bank credit intermediaries (NBCI) — including mortgage investment corporations (MICs), mortgage finance corporations (MFCs) and other financing and leasing operations — from 2007 to 2018.
The total assets of the NBCI sector more than doubled between 2007 and 2018, StatsCan reported.
The sector’s loan growth outpaced the chartered banks over the same period, with non-bank lending rising by 10.9% annually, compared with 8.4% for the banks.
The rise in non-bank assets was led by MICs and MFCs, which averaged 25.0% annual growth over the period, StatsCan said.
The total financial assets of the MIC sector jumped from C$9.6 billion in 2007 to C$29.9 billion in 2018, StatsCan reported.
“Non-bank financial intermediaries are becoming an increasingly important source of financing for Canadians,” StatsCan said.
“While these selected non-bank financial intermediaries account for a small share of total lending, their overall growth from 2007 to 2018 has outpaced that of traditional lending sectors such as chartered banks.”