Shadow banking ‘won’t compensate for lending fall’

The growth in shadow banking across the eurozone will not compensate for the fall off in traditional bank lending as banks continue to deleverage, according to a new report by ratings agency Standard & Poor’s (S&P).

S&P attributes the comparatively low levels of shadow banking finance to a lack of regulation and poor demand for credit, particularly in periphery eurozone countries.

The shadow banking system consists mainly of hedge funds, structured investment vehicles and the securitisation markets.