Don’t Just Expose Shadow Banks, Regulate Them
We know much more now about the operations of such financial institutions. We’re no closer to reining in the risks they pose.
The world is still dependent on credit for growth.
Photographer: Anne-Christine Poujoulat/AFP/Getty Images
Anyone who doubts the risks posed by murky shadow banks need only look to India, where the collapse of one such lender has sparked a nationwide credit crunch and raised fears of a Lehman-like financial crisis. Since 2008, better data have at least begun to bring the operations of such non-bank intermediaries out of the shadows. What’s needed now isn’t more transparency; it’s meaningful regulation.
Shadow banking’s share of the financial system has increased dramatically. According to the latest data from the Financial Stability Board, assets of non-bank intermediaries, using a narrow definition, reached $117 trillion in 2017 -- a 31% share of total global financial assets, up from 26% in 2008. Meanwhile, over the same period, banks’ share of total global financial assets declined from 45% to 39%.