The shadow banking system can broadly be described as “credit intermediation involving entities and activities (fully or partially) outside the regular banking system” or non-bank credit intermediation in short. Earlier this year, the FSB published policy recommendations to strengthen oversight and regulation of shadow banking. The objective is to address bank-like risks to financial stability emerging outside the regular banking system while not inhibiting sustainable non-bank financing models that do not pose such risks.
The FSB set out a monitoring framework for the shadow banking system in its report to the G20 in October 2011. Based on this framework, the FSB published the results of its third annual monitoring exercise in November 2013 using end-2012 data. The report includes data from 25 jurisdictions and the euro area as a whole, bringing the coverage of the monitoring exercise to about 80% of global GDP and 90% of global financial system assets.
The exercise was conducted by the FSB Analytical Group on Vulnerabilities (AGV), the technical working group of the FSB Standing Committee on Assessment of Vulnerabilities (SCAV), using quantitative and qualitative information, and followed a similar methodology to that used for the 2012 report . Its primary focus is on a “macro-mapping” based on national Flow of Funds and Sector Balance Sheet data (hereafter Flow of Funds), that looks at all non-bank financial intermediation to ensure that data gathering and surveillance cover the areas where shadow banking-related risks to the financial system might potentially arise.