Shadow Banking Hits Record $67 Trillion Globally, Led By The US; FSB Urges Tough Rules

International Business Times, BY Moran Zhang, November 19

It’s hard to regulate what you can’t see and that’s why the so-called “shadow banking” – a whole range of activities that replicate some of the activities of regulated banks but fall outside of traditional oversight – has grown to a new high globally last year, a top regulatory group said, calling for tougher rules to prevent the obscure sector from triggering a new financial crisis.

The Financial Stability Board, a global financial policy group comprised of regulators and central bankers, found that shadow banking around the world more than doubled to $62 trillion in five years to 2007 before the crisis hit. 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 U.S. has the world’s largest shadow banking system, with assets of $23 trillion in 2011. It is followed by the euro zone with $22 trillion and Britain with $9 trillion, according to the FSB. However, the share of activity based in the U.S. has declined from 44 percent in 2005 to 35 percent in 2011, while the shares of the U.K. and the euro area have increased.

Previously: How Shadow Banks Rule the World

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