Authorities ‘do not understand shadow banking’

Authorities are nowhere near to fully understanding “shadow banking” as the $75tn (€68tn) sector grows under the influence of new technology and regulation, a top markets supervisor said yesterday.

Shadow banking refers to the supply of credit outside traditional banks, such as from private equity investors, money market funds, insurers, repurchase agreements and securities lending.

The Group of 20 economies (G20) agreed during the 2007-09 financial crisis that the opaque sector should be better supervised, fearing that as traditional banks become more regulated, risky lending activities would migrate there. But progress has been slow.