The non-bank financial sector’s share of global assets grew
to 51%, or $256.8 trillion, last year and expanded at double the rate of the traditional banking industry, the Financial Stability Board said on Tuesday.
Non-bank financial intermediaries involved in what is commonly referred to as the “shadow banking” se
ctor include money market funds, hedge funds, private credit providers, pension funds and insurers among
others. The sector’s rapid expansion is a growing priority for regulators, who worry about its lack of transparency a
nd the risk problems there could endanger broader financial markets.
The FSB, which coordinates financial rules for the Group of 20 economies, reported in its annual review of the sector that the share of global assets was the
second-largest on record and similar to pre-pandemic levels.
Regulators Seek More Knowledge, Lending Standards Questioned
The sector’s growth of 9.4% year-on-year – compared with the banking industry’s 4.7% – was helped by “buoy
ant risk appetite” thanks to rising asset prices and lower interest rates, the r
eport based on the latest available data to the end of 2024 found.
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The financial assets of a narrower definition of non-banks, grouping those whose activities may pose “bank-like
financial stability risks,” grew by 12.7% to $76.3 trillion, with even faster growth in emerging markets, the FSB found.
Regulators want to improve their knowledge of shadow banking. The Bank of England announced this month it was
launching a stress test of how the global private equity and private credit industries would deal with a major financial shock.
The bankruptcy of two U.S. businesses – subprime lender Tricolor and auto parts maker First Brands – h
as also rattled credit investors this year, placing focus on the quality of lending standards in the non-bank sector.
The FSB launched a monitoring framework to track non-bank fin
ancial intermediaries in 2010 but said on Tuesday it remained concerned over “severe limitations in the availability of data
for private credit in statistical and regulatory reports.”
“The assessment of private assets’ potential impact on financial stability will be an important part of the overall
FSB’s surveillance work in the year ahead,” it said.