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Shadow Banking Assets Increase By $5 Trillion To Record $75 Trillion, 120% Of Global GDP
Call it Monitoring Universe of Non-Bank Financial Intermediation (MUNFI), Other Financial Intermediaries (OFI), non-bank financial intermediation or, easiest of all, by its widely accepted name, Shadow banking. Whatever you want to call it, the latest just released estimate by the Financial Stability Board of how many assets current exist outside of the regular banking system (and are thus in the shadows) around the globe should explain why these day the one thing central bankers are most worried about is the uncontrolled proliferation of shadow assets (technically it is liabilities, but that is a different discussion). The reason: according to the broadest measure of shadow banking, it grew by $5 trillion in 2013 to reach $75 trillion. This represents some 25% of total financial assets and when expressed in terms of global GDP, it amounts some 120% of global GDP.
We are not exactly sure which is scarier: that total financial assets amount to about 500% of world GDP or that about $75 trillion in financial leverage is just sitting there, completely unregulated and designed with one purpose in mind: to make billionaires into trillionaires (with taxpayers footing the bill of their failure).
Some of the other findings:
- MUNFI assets grew by 7% in 2013 (adjusted for foreign exchange movements), driven in part by a general increase in valuation of global financial markets. In contrast total bank assets were relatively stable. Within the headline global growth figure of MUNFI assets exists considerable differences across jurisdictions and entities.
- This year, the FSB continued to refine the shadow banking measure to produce an estimate that more tightly focuses on shadow banking risks, narrowing down the broad MUNFI estimate by filtering out entities that are not part of a credit intermediation chain and those that are prudentially consolidated into a banking group. Using more granular data reported by 23 jurisdictions, the broad MUNFI estimate of non-bank financial intermediation was narrowed down from $62 trillion to $35 trillion.
- Based on the narrowed down estimate, the growth rate of shadow banking for this smaller sample in 2013 was +2.4%, instead of +6.6% for the MUNFI (using the same smaller sample). The narrowing down approach remains work in progress and will improve further over time.
- By absolute size, advanced economies have the largest shadow banking sectors, while emerging market jurisdictions recorded the fastest growth rates (albeit from a relatively small base). While the non-bank financial system may contribute to financial deepening, careful monitoring is still required to detect any increases in systemic risk factors (e.g. maturity and liquidity transformation, and leverage) that could arise from the rapid expansion of credit provided by the non-bank sector.
- Trust Companies and Other Investment Funds were the fastest growing sub-sectors globally in 2013. Trust Companies have consistently grown at a fast pace, whereas the 18% annual growth in Other Investment Funds, the largest sub-sector, was sharply higher than in the preceding years.
- The Hedge Funds sub-sector remains significantly underestimated in the FSB’s data collection exercise. Further refinement of the data for this sector could provide important additions to future editions of this report
And here is why even the report above is woefully underestimating to summarize the epic leverage in the system:
Hedge Fund assets amounted only to $0.1 trillion in 2013, according to jurisdictions’ submissions for the macro-mapping exercise. However, the size of the sector in the FSB’s exercise is significantly underestimated primarily due to two factors. First, off-shore financial centres, where most Hedge Funds are domiciled, are not included in the current scope of the exercise. Second, the Flow of Funds statistics are not granular enough in many jurisdictions to allow a separation between Hedge Funds and other sectors. Last year’s report referenced results from IOSCO’s Hedge Fund survey which provided a more representative picture of the sector. Updated estimates for 2014 are currently not available, but the IOSCO has launched a new survey which should provide an overview of the global Hedge Fund industry. Information is expected to be available in the first half of 2015. However, data from a private sector source (Hedge Fund Research) show that globally assets under management in this industry amounted to $2.6 trillion at the end of 2013. The U.S. and the United Kingdom, which hold the great majority of global Hedge Fund assets, published results from national Hedge Fund surveys in 2014. In the case of the United Kingdom, the Financial Conduct Authority’s report shows that approximately $470 billion of Hedge Fund assets were managed in the United Kingdom. While data collected by the US Securities and Exchange Commission (SEC) show that registered investment advisors managed $5 trillion of Hedge Fund assets. Note that these numbers are from different sources with generally different methodologies and survey coverage, and are therefore not necessarily comparable.
So just call it $80 trillion in shadow banking exposure.
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<Insert Witty Comment Here>
So "regulated" would be better. Define "Better."
Shadow banking, by ZIRP, sponsored by Berstankie and Old Yeller.
The problem is, thanks to operatives like Bob Rubin, the deregulation came after the banks gained total political control. It is not hyperbole to say that these people have total access to the US Treasury. They can walk in and take as much as they want, forever. We’ve been saying that; now it is starting to be clear.
"$75 trillion. This represents some 25% of total financial assets"
So total assets in the world are $300 trillion?
Hmmm ask or bid price?
it's just a number
as the end draws near the fed can get their lackey reporters to harp on an approaching danger: shadow banking. then, when the curtain comes down they will have created the perfect scapegoat.
hmmm
Only the shadow knows.
Paper promises. The only thing that is real are the commissions, payable upon signature
Plenty more room to grow. 200%. 500%. Just numbers in a computer.
white people problems
winner
you distilled the problem into 3 words.
Bravo
Very rich white people problems
What have you got against trillionaires? It's just time. For fun let's call the Guiness Book...! I'm sure average folk won't mind footing the counter party risk, right? What they don't know about, can't hurt them, right? 'Sides, it's time for Thursday Night Football!
nothing bothers me more than tightwad billionaires
years ago someone interviewed warren buffet and asked why he didn't own a yacht ... he just laughed and mentioned the problems/expense of owning one ... finished off with "better to know someone with boat than own one yourself"
dammit, if we're going to hand them all our $$ at least have the decency to spend a bit of it ... the old trickle down
"tightwad billionaires"
Soon - tightwad trillionaires. Wonder if they'll benchmark pay/benefits for their private armies? As unaccountable as the US PTB have been with the US military, imagine how unaccountable these ijiots (sic) will be roamin' around the world with high powered weapons/cyber armies at their disposal. Sounds like a bad sci fi movie from 30 years ago, that's going to come true soon enough...heck, with the tight cohesion between crony politicians, crony corporations that make up the military industrial complex, and the PTB billionaires/trillionaires (what's adding a few zeros between friends?), it's already reality today.
http://finance.yahoo.com/news/robots-replace-troops-battlefield-11150008...
The whole shadow banking system are simply multiple claims over the real world assets.
It is like trying to wage a war without weapons.
Hence, current proliferation of wars world wide, almost ww3.
Insolvent bank lobby oligarchs are trying to expropriate world oligarchs via shadow banking and derivatives.
Hmmmmm. It doesn't work like that. Those other world oligarchs are replying with missiles, guns, land grab etc.
Financial war is dead along with bank lobby now
Real war is here. Pentagon is back in the driver's seat
The whole shadow banking system are simply multiple claims over the real world assets.
...this is an insightful and clarifying comment, especially for those who don't understand leverage, rehypothecation, CDS, etc
In general I think this is true, as long as everyone thinks their assets are safe where the bad people can't steal them.
To me it's kind of like this, you have the fractional reserve lending crowd, they want you to see that the cenral bank prints money. This isn't tecnically true, they issue credit on the full faith and authority of the US government. Over time as that credit is serviced and paid down with it's interest it becomes money.
All lending is supposed to be secured lending, a bank must hold 10% of it's outstanding loans in cash reserves but the remaining 90% comes from assets the corporate body is carrying. Those assets should be marked to market daily, close of each business day, but they clearly are not. Derivatives help them achieve fractional reserve lending in this "secondary" market, so they are carrying this crap as collateral for their secured lending but in reality, in a firesale, what would those "assets" really be worth? Well we know that the fed will buy them at whatever fictional value the banks want to claim as part of "QE".
In a way, derivatives are a separate and very real ACCOUNTING system to determine how much debt would need to be liquidated via monetization in QE. If the whole banking system gets caught up in a daisy chain collateral call on the banks, then that is how much currency they have to print in order to prevent a full scale collapse of the interleveraged commercial banking system.
Whatever, it is allowed and connected to the owners of the Federal Reserve. Otherwise, there wouldn’t be such a thing – just another shady way of stealing. It’s the hardware that carries out the policies of the tyrants, i.e., the workforce.
Otherwise, why operate in the shadows.
“According to Hervé Hannoun, Deputy General Manager of the Bank for International Settlements (BIS), investment banks as well as commercial banks may conduct much of their business in the shadow banking system (SBS), but most are not generally classed as SBS institutions themselves.(Hannoun 2008)[4][5] At least one financial regulatory expert has said that regulated banking organizations are the largest shadow banks.[“
http://en.wikipedia.org/wiki/Shadow_banking_system
OT - Sent my kids to "halloween costume day" at school dressed like this:
http://www.shalomlife.com/culture/18828/kids-purim-costume-idea-the-burning-twin-towers-photo/
now I have to pick them up from detention...
Wow, you are a good Dad. No kiddin'.
Shake the iSleep from the eyes of the plugged in and tuned out.
And help toughen your children's skin in the meantime.
That happened in Israel (our BFF) and wouldn't have even been noticed if someone hadn't posted it on YouTube.
In the U.S.: if you dressed your kids on Halloween like the Twin Towers with burning planes sticking out like that they would be arrested by DHS Stazi SWAT teams and held indefinately without charges. Teams of TSA agents would be sent to their cell to gang-grope them until they confessed to being muslim converts radicalized at the local mosque and ultimatly seeking the establishment of a U.S. caliphate. Oddly enough, the U.S. State Department would try to arm them, and a mysterious Middle East donor would send them a white Toyota HiLux.
Now if you dressed your kids like Eichmann for Halloween and had them carry a cannister that said Zyklon for candy, then YOU would be arrested as well and they would kill your dog and your neighbor's dog in the process. MSM would have choppers circling your house and provide the usual nauseating days and days of 24x7 coverage of your anti-Semitic hate crime. They would investigate your past and find a comment somewhere questioning why there were so many Jews in the Fed and Department of Defense. Many Rabii would be interviewed. Ted Turner would put out a contract on you (Hillary would be all over that). Child Protection Services would be your kid's new parents. Once the ADL and AIPAC lawers were done with you, you would have lost your home, job, life savings, car and all your other posessions. You would be forced into a life of financial servitude to pay for several PBS specials on the Holocaust . Your house would be torn down and the land turned into a Holocaust (only the Jewish one - others don't count) Memorial. Eventually your body would end up in a New Jersey dumpster riddled with polonium bullets, and your death would be ruled a suicide.
i won't even try to pretend i know what the heck is going on ... but i have 100% faith that our politically appointed (hacks) heading up the regulatory bodies know ...
ever see this? http://margincallmovie.com/
After the Fed ending QE aka TBTF assistance program,Gold and Silver prices are dropping big time.
Time to take advantage of these lower prices,with more lower prices on the horizen...
Funny thing is, it's probably the same $500 Million, rehypothecated 150,000 times.
They will never let it tank under dear leader
They don't give a fuck about "dear leader".
#Sustainable
When does Chuck Hagel come out and say they can't locate $2T
/s
The Great Brain Robbery continues apace.
The sheeple work and pay taxes while they seemingly have no idea why and who makes them suffer.
Herded into 401K's/IRA's/Pensions that are sheared for Banskster wool, paid nothing to save, taxed to fund speculators.
Enough said right there
I tought the Netherlands was slowly flooded by the sea but it seems to be shadow banking assets.
Shadow banking exposure plus dark pool $1.4 quadrillion derivatives universe = party time for the MIC, unfortunately. This is not a democracy, the BORG.
........and now when the europeans go full retard on QE expect $USD to rise even further - crushing commodities further. this shit show can go on FOREVA. And no ZH chart is gonna change this fact. no debt/gdp measure....no unemployment measure....no amount of misery indices will ever change this fact. At least that is what it feels like. Just had lunch with an old timer. To him, nothing makes sense anymore, negative real rates (soon to be negative nominal), burgeoning debt, and everyone with little to no savings. And the right thing to do - right now - is to max out everything and buy something and fuck tomorrow - is the new normal. He thinks a correction is coming and yet its really all about relative values. It almost feels like all the debt, the negative rates, and so on, are a distraction from actually doing the right thing - which is to stay invested - that as my broker said 4 years ago - debt doesn't matter.
maybe they are right.
If the economy was healthy and balanced we would not be experiencing slow growth while massive amounts of money are being printed and poured into the system. The crux of our problem remains in the fact that both people and governments have lived beyond their means by taking on debt they cannot repay. Over the last several decades we have created entitlement societies built on the back of the industrial revolution, technological advantages, capital accumulated from the colonial era, and the domination of global finances.
Promises were made on the assumption that the advantages we enjoyed would continue in both Europe and the US. Ever greater prosperity and entitlements were to be sustained through debt financed consumption growth. In that eerie fantasy world, debt fueled consumption was to be the catalyst to bring about evermore growth. Debt does matter and the following article delves deeper into why kicking the can down the road will ultimately fail. Prepare for many of the promises made in the past to be soon broken.
http://brucewilds.blogspot.com/2014/08/modern-monetary-theory-is-wrong-debt.html
I guarantee you that there is indeed a competition amongst these folks to be the world's first Trillionaire...this is pushing a lot of this frantic seeking of profits. A number of people would love to be the first, and see themselves as having a chance to attain it. They act with NO thought of the consequences. They want the trophy.
It seems like insanity to most of us because to us, money is directly tied to our day to day NEEDS. Why would anyone gamble with something so vital? If we were to lose 90% of our wealth overnight, it would be nothing short of catastrophic.
Well, to these guys, money has a different meaning, because of the effects of scale on the balance of power between the elements of a system. They can lose the same 90% of their wealth, and still be living the kind of lives they're still living, though with perhaps fewer accumulated assets on record. They don't see it as a big deal to give up such a large percent...it's just a question of WHO gives it. They think, in an Antoinette-like fashion, that the 90% of people who take so much in government bennies should at least pay more for them. And make the Antoinette-like error of forgetting the effects of scale on those tinier household budgets.
They have an appetite for risk way out of proportion to the economic world we all have to live in, at the same time they become influential enough to TAKE some of those risks. The race to be the first Trillionaire is gonna end in tears.
That's a lotta bean$. Pretty soon someone will be able to buy a local planet. I can hear it now, the Reptoids will be whining "there goes the neighborhood".
We're interstellar riff-raff.
Monopoly money...The con continues.
dt
Meanwhile, the death of the traditional banking system continues.
Just a matter of time before they're all consolidated into a handful of Monsters.
Chart: http://research.stlouisfed.org/fred2/series/FREQ
I think it's to late! Your prediction happened while you were posting your comment.
The authorities are acting primarily to prop up governments as well as the economy by saving the financial system. Those in power have joined with the banks to create the "Financial-Political Complex" that promotes the current financial policy and supports banks that are "to big to fail". More on this unholy union in the article below.
http://brucewilds.blogspot.com/2012/10/the-financial-political-complex.h...
A great deal of the shadow banking world falls into and overlaps into the grey world of derivatives. The more and more I study derivatives it now appears the main goal of QE may have been to hold up the underlying value of assets that feed into and support the massive derivative market more than help the economy.
QE has up to now stopped an implosion of derivatives and the resulting contagion and shock that would have spread throughout the financial system. Everyone paying attention knows that the size of the derivatives market is about 20 times larger than the global economy. About 95% of the $230 trillion in US derivative exposure is held by four US financial institutions, the article below looks into how this could collapse the economic system.
http://brucewilds.blogspot.com/2014/03/derivatives-house-of-cards.html