Deloitte: ‘Shadow banking’ is worth $9.53 trillion
30 May 2012 New York
Image: Shutterstock
The ‘shadow banking’ system in the US may not be as large as regulators and market participants fear, but its size could increase as regulatory changes and financial innovation take hold, according to a new quarterly index from the Deloitte Center for Financial Services.
The Shadow Banking Index defines shadow banking to include components that make up a market-funded, credit intermediation system of maturity and liquidity transformation through securitisation and secured-funding mechanisms.
To some extent, it exists outside of the traditional banking system and does not have government guarantees, according to the Deloitte Center for Financial Services.
The index shows that the shadow banking system totalled $9.53 trillion at the end of 2011, which is more than 50 percent below its peak in 2008, and a figure that is considerably lower than many estimates.
“With other size estimates ranging from $10 to $60 trillion, we think shadow banking is a concept continuing to look for a better definition,” said Adam Schneider, the executive director of the Deloitte Center for Financial Services.
Don Ogilvie, the independent chairman of the Deloitte Center for Financial Services, said: “We expect that the components in the index will increase or decrease as new laws and regulations are adopted and as new financial products are created.”
In a recent speech, US Federal Reserve chairman Ben Bernanke said: “Unfortunately, data on the shadow banking sector, by its nature, can be more difficult to obtain. Thus, we have to be more creative to monitor risk in this important area. We are developing new sources of information to improve the monitoring of leverage.”
The index counts securities lending as an activity of the shadow banking system. Other entities and activities include collateralised debt obligations and repo agreements.
It found that securities lending is the only activity to have doubled in volume since the index’s baseline in 2004, adding that securities lending is “vital to the functioning of the modern financial system”.
The Shadow Banking Index defines shadow banking to include components that make up a market-funded, credit intermediation system of maturity and liquidity transformation through securitisation and secured-funding mechanisms.
To some extent, it exists outside of the traditional banking system and does not have government guarantees, according to the Deloitte Center for Financial Services.
The index shows that the shadow banking system totalled $9.53 trillion at the end of 2011, which is more than 50 percent below its peak in 2008, and a figure that is considerably lower than many estimates.
“With other size estimates ranging from $10 to $60 trillion, we think shadow banking is a concept continuing to look for a better definition,” said Adam Schneider, the executive director of the Deloitte Center for Financial Services.
Don Ogilvie, the independent chairman of the Deloitte Center for Financial Services, said: “We expect that the components in the index will increase or decrease as new laws and regulations are adopted and as new financial products are created.”
In a recent speech, US Federal Reserve chairman Ben Bernanke said: “Unfortunately, data on the shadow banking sector, by its nature, can be more difficult to obtain. Thus, we have to be more creative to monitor risk in this important area. We are developing new sources of information to improve the monitoring of leverage.”
The index counts securities lending as an activity of the shadow banking system. Other entities and activities include collateralised debt obligations and repo agreements.
It found that securities lending is the only activity to have doubled in volume since the index’s baseline in 2004, adding that securities lending is “vital to the functioning of the modern financial system”.
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