01 June 2017
Frankfurt
Reporter: Drew Nicol

Shadow banking growth slows in Q4


The value of EU shadow banking slowed significantly in Q4 2016, according to the European Systemic Risk Board’s latest review of the sector.

The annual growth rate of the broad measure of shadow banking dropped to 2.6 percent in final quarter of 2016, compared to an average annual growth rate of 8.3 percent between 2012 and 2015.

According to the European Systemic Risk Board, the drop off can be attributed to both a slowdown in asset valuations and net transactions.

The broad measure of shadow banking in the EU has expanded by 30 percent since 2012.

By contrast, total assets of credit institutions in the EU declined by 6 percent between 2012 2016.

The euro area’s shadow banking sector accounted for €31 trillion in total assets at the end of Q4 2016, meaning it expanded faster than at the EU level at an annual rate of 4.2 percent.

This compares with an average annual growth rate of 10.2 percent between 2012 and 2015, representing an almost 40 percent expansion between 2012 and 2016.

As part of its risk review of the sector, the report focused on four key risks that it highlighted as being worthy of monitoring closely.

The first was liquidity risk and risks associated with leverage among some types of investment funds, such as those which invest in less liquid markets while offering daily redeemable shares or which are highly leveraged.

Second, the report highlighted interconnectedness and contagion risk across sectors and within the shadow banking system, including domestic and cross-border linkages.

Third was procyclicality, leverage, and liquidity risk created through the use of derivatives and securities financing transactions. Finally, vulnerabilities in some parts of the other financial institutions sector, where significant data gaps prevent a definitive risk assessment, were considered a key risk. The report also noted that the data gathered through the reporting requirements of the Securities Financing Transactions Regulation will provide greater insight into some of these opaque areas.

More news
The latest news from Securities Lending Times
Join Our Newsletter

Sign up today and never
miss the latest news or an issue again

Subscribe now
Pension plans accuse banks of anti-competitive behaviour
18 August 2017 | New York | Reporter: Drew Nicol
Three US pension plans have accused six of securities lending’s biggest banks of blocking nascent platforms and keeping the market for themselves
Repo passes judgement on MMF collateral rules
18 August 2017 | Brussels | Reporter: Drew Nicol
Thirteen industry stakeholders made up of major global banks and industry associations responded, with largely positive feedback on ESMA’s proposals
UBS expands securities lending team
17 August 2017 | Zurich | Reporter: Drew Nicol
UBS’s has regained Iwan Lichtsteiner as a member of its fixed income, securities lending and financing team, effective from October
Clearstream angling for central role in China’s market growth
17 August 2017 | Luxembourg | Reporter: Drew Nicol
Deutsche Börse Group and Clearstream representatives will be present at the Shanghai International Financial Advisory Council being at the end of August
Whitebox Advisors chooses Broadridge suite solution
17 August 2017 | New York | Reporter: Drew Nicol
Whitebox Advisors has mandated Broadridge Financial Solutions to transform its technology platform into a fully integrated, hedge fund operation
Clearstream confirms rates for September
16 August 2017 | London | Reporter: Jenna Lomax
The market infrastructure provider charges different rates for equities and debt, and on a per currency basis
CloudMargin unveils microsite for OTC derivatives
15 August 2017 | London | Reporter: Jenna Lomax
The new microsite, designed by UK-based design agency Eight Arms, was created to help financial institutions globally become accustomed to the new margin rules and other regulations affecting their collateral management functions