The European Systemic Risk Board (ESRB) has today published the first “EU Shadow Banking Monitor”, which presents an overview of developments in the European shadow banking system to assess potential risks to financial stability. This is the first report in an annual series that will contribute to the monitoring of a part of the financial system that has experienced significant growth in recent years.
The ESRB has identified a number of issues that can be a source of and amplify systemic risks.
- Financial leverage, in particular in hedge funds, but also in real estate funds.
- Systemic interconnectedness, which is especially pronounced between money market funds (MMFs) and the banking system.
- Maturity and liquidity transformation, which are a concern, especially for some bond funds.
The ESRB has today also published an ESRB Occasional Paper, “Assessing shadow banking – non-bank financial intermediation in Europe”, which complements the “EU Shadow Banking Monitor”. The paper describes in further detail the monitoring framework developed by the ESRB for assessing shadow banking activities in Europe.
Both the EU Shadow Banking Monitor and the methodology paper are available here.