Global shadow banking grows by $5 trillion

THE SHADOW banking industry grew by $5 trillion (R54 trillion) to about $75 trillion worldwide last year, driven by lenders seeking to skirt regulations and investors searching for yield amid record-low interest rates. The size of the shadow banking system, which includes hedge funds, real estate investment trusts and off-balance sheet investment vehicles, is about 120 percent of global gross domestic product, said a report published by the Financial Stability Board (FSB) yesterday. Shadow banking “tends to take off when strict banking regulations are in place, when real interest rates and yield spreads are low and investors search for higher returns, and when there is a large institutional demand for assets”, it said. “The current environment in advanced economies seems conducive to further growth of shadow banking.” The FSB published guidelines for supervisors last year to keep track of the industry. – Bloomberg