Monday

13th Jul 2020

EU shadow banking assets worth €17 trillion

  • Shadow banking system in the UK had €7 trillion in assets in 2011. (Photo: J. A. Alcaide)

The eurozone has the world's second largest shadow banking system after the United States, with assets worth some €17.2 trillion in 2011.

"The US' share of the global shadow banking system has declined from 44 percent in 2005 to 35 percent in 2011. This decline has been mirrored mostly by an increase in the shares of the UK and the euro area," said the Basel, Swizterland-based Financial Stability Board (FSB) in a report released on Sunday (18 November).

Read and decide

Join EUobserver today

Support quality EU news

Get instant access to all articles — and 20 years of archives. 14-day free trial.

... or subscribe as a group

The UK takes the largest share in Europe with €7 trillion, while the US, in comparison, has €18 trillion.

The FSB, which monitors international financial sector policies, says such credit transactions "made outside the normal banking system" have continued to increase in size after the 2008-11 financial crisis.

The transactions are often unregulated and present higher risks when compared to traditional banking activities.

Companies involved in shadow banking specialise in anything from capital venture, securities markets, pension and mutual funds.

In some cases, they represent a significant share of financial activities when compared to standard commercial banks.

Also known as non-bank financial institutions (NBFIs), shadow banking companies compete with the commercial banks in areas like providing credit to small businesses.

“The Netherlands (45 percent) and the US (35 percent) are the two jurisdictions where NBFIs are the largest sector relative to other financial institutions in their systems," says the FSB.

The NBFIs in the eurozone, for its part, is around 30 percent.

The assets generated from such institutions are large. For the eurozone, they represent 111 percent of its total GDP.

In the UK, it is the equivalent of 370 percent of its GDP, while the Netherlands tops out at 490 percent.

"Part of this concentration can be explained by the fact that these jurisdictions are significant international financial centres that host activities of foreign-owned institutions," notes the FSB.

Overall assets in the global shadow banking system had seen a rapid increase just before the crisis, rising from €20 trillion in 2002 to €48.5 trillion in 2007.

The total then declined to €46 trillion in 2008 "but increased subsequently to reach €52.5 trillion in 2011."

Agenda

G20 and Syria top the bill THIS WEEK

EU politicians will return from their summer holidays to a week dominated by the G20 summit and by the Syria crisis.

EU clamps down on shadow banking

EU commissioner Barnier has laid out plans to regulate the shadow banking sector, seen as playing a major role in the 2008 financial crisis.

Michel lays out compromise budget plan for summit

Ahead of expected tense discussions next weekend among EU leaders, European Council president Charles Michel tries to find common ground: the recovery package's size, and grants, would stay - but controls would be tougher.

EU forecasts deeper recession, amid recovery funds row

The economies of France, Italy and Spain will contract more then 10-percent this year, according to the latest forecast by the EU executive, as it urges member state governments to strike a deal on the budget and recovery package.

EU plans tougher checks on foreign takeovers

The EU and its member countries are worried that foreign powers, such as China and its state-owned companies will take advantage of the economic downturn and buy up European firms

News in Brief

  1. Croatia opens for US tourists, defying EU ban
  2. Poll: only 61% of Germans would get Covid-19 vaccine
  3. UK to spend €788m on new UK-EU border control system
  4. Berlin wants first use of EU cyber sanctions on Russia
  5. Erdogan warns neighbours over hydrocarbon reserves
  6. Bulgaria: political crisis amid anti-corruption protests
  7. Pope and Turkish-German leader join Hagia Sophia protest
  8. France and UK create joint migrant intelligence unit

EU forecasts deeper recession, amid recovery funds row

The economies of France, Italy and Spain will contract more then 10-percent this year, according to the latest forecast by the EU executive, as it urges member state governments to strike a deal on the budget and recovery package.

Stakeholders' Highlights

  1. UNESDANext generation Europe should be green and circular
  2. Nordic Council of MinistersNEW REPORT: Eight in ten people are concerned about climate change
  3. UNESDAHow reducing sugar and calories in soft drinks makes the healthier choice the easy choice
  4. Nordic Council of MinistersGreen energy to power Nordic start after Covid-19
  5. European Sustainable Energy WeekThis year’s EU Sustainable Energy Week (EUSEW) will be held digitally!
  6. Nordic Council of MinistersNordic states are fighting to protect gender equality during corona crisis

Latest News

  1. Poland's EU-battles to continue as Duda wins tight vote
  2. EU 'in-person' summit plus key data privacy ruling This WEEK
  3. Let's have positive discrimination for EU stagiaires
  4. We need to do more for our small and medium-sized enterprises
  5. Romania's virus surge prompts queues and new worries
  6. Michel lays out compromise budget plan for summit
  7. Border pre-screening centres part of new EU migration pact
  8. EU 'failed to protect bees and pollinators', report finds

Join EUobserver

Support quality EU news

Join us