Finadium: Shadow Banking is US$17 trillion industry, not US$60 trillion. Money market funds are not Shadow Banks.

In a new report, Finadium has sized the Shadow Banking industry and concluded that products that fit the Financial Stability Board’s (FSB) definition of Shadow Banking total US$17 trillion in assets outstanding. This is substantially less than the US$60 trillion popularly reported. While the figure is still large, it is almost 75% less than the size of this market as has been publicized. The report, Getting Ahead of Shadow Banking Regulation for Securities Lending, Repo and Money Markets, was released yesterday by Finadium.

In the report, Finadium provides an analysis of the FSB’s thinking on Shadow Banking for securities lending, repo and money market funds. Finadium investigates the FSB’s documentation, public presentations and relationships with national regulators that are driving conversations. The report also compares national regulatory initiatives to FSB discussions to show how the directions taken by one regulator or another are likely to influence global thinking. It concludes with Finadium’s expectations on realistic actions that the Financial Stability Board and national regulators may take as a result of Shadow Banking investigations.

A major finding of the report is that Money Market Funds (MMFs) are not Shadow Banks. Although MMFs provide a diversified credit portfolio to investors, these funds do not fit the profile of other instruments that more accurately fit the Shadow Banking label. While regulators may ultimately seek greater regulation for MMFs, this should not be lumped together with Shadow Banking proposals.

The report comes in advance of a major European Union conference on Shadow Banking scheduled for April 27, 2012.

For more information on the report please visit the Finadium website.

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