'Shadow Banks' Now Own Over Half of Global Assets, FSB Says

The non-bank financial sector is booming – growing at double the rate of the traditional banking sector – and now owns 51% of global assets, worth close to $257 trillion, the Financial Stability Board said on Tuesday.

Non-bank financial enterprises involved in what is commonly known as the “shadow banking” sector include money market funds, hedge funds, private credit providers, pension funds and insurers among others.

The sector’s rapid expansion is a growing concern for regulators, who worry about its lack of transparency and the risk problems in that segment could endanger broader financial markets.

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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 want more details, less lending risks

The non-bank sector grew 9.4% year-on-year – compared with the banking industry’s 4.7% growth – was helped by “buoyant risk appetite” thanks to rising asset prices and lower interest rates, the report, based on the latest available data to the end of 2024, found.

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 US businesses – subprime lender Tricolor and auto parts maker First Brands – has 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 financial 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.