Shadow banking operations more coarse than before the financial crisis

Shadow banking operations more coarse than before the financial crisis

According to the report, these so-called shadow banks, such as hedge funds, had a global business volume of 67 billion dollars at the end of 2011. Growth thus continues unabated, albeit at a slower pace than in the period before the financial crisis, states the FSB in its report published in basel on sunday. According to the report, shadow banks had an estimated business volume of 26 billion dollars in 2002; in 2007, it was already 62 billion dollars.

However, the share of shadow banks in all financial transactions has declined since the beginning of the crisis, as the FSB notes. It will remain at around 25 percent in the period 2009 to 2011, "after a peak of 27 percent in 2007".

Shadow banks" are financial institutions that are active in the banking business but operate outside the actual banking system and are therefore not subject to its rules. They operate in a gray zone or shadow world, hence the name. These include, for example, hedge funds, or private equity firms (external investors who provide companies with equity capital on an exorbitant basis).

For its survey, the FSB looked at 25 countries and the eurozone as a whole, significantly more than a year ago, when only eleven countries plus the eurozone were evaluated. This means that 86 percent of the world’s economic output is now included in the sample.

In europe, shadow banks have long been in the EU commission’s sights. It is planning a legislative proposal for early 2013 under the leadership of internal market commissioner michel barnier. Barnier calls, for example, for limits to be placed on banks’ ability to outsource business to shadow banks, for more rights to be given to supervisors, or for entirely new, specially tailored rules to be put in place. Stricter requirements are proposed by brussels for five of these banking services, including asset management, securities and securitization.