The global non-bank financial sector — often referred to as shadow banking — is now larger than the traditional banking system, accounting for 51% of global financial assets, or $256.8 trillion, according to the Financial Stability Board (FSB).
Crucially, the sector is expanding at double the pace of banks.
🔹 By the Numbers
- Non-bank financial assets: +9.4% YoY
- Traditional banking assets: +4.7% YoY
- Assets linked to bank-like financial stability risks grew 12.7% to $76.3 trillion
- Growth was even faster across emerging markets
Non-bank intermediaries include money market funds, hedge funds, private credit providers, insurers, pension funds, and private equity firms.
🔹 Why Regulators Are Concerned
The FSB flagged transparency gaps, particularly in private credit, warning that limited data makes it harder to assess systemic risk.
Recent bankruptcies — including subprime lender Tricolor and auto-parts maker First Brands — have sharpened scrutiny on lending standards outside the regulated banking system.
In response:
- The Bank of England has launched stress tests on private equity and private credit
- The FSB said monitoring private assets will be a key surveillance priority in the year ahead
🔹 The Big Picture
The rapid rise of shadow banking reflects strong risk appetite, higher asset prices, and shifting capital flows — but it also raises critical questions about financial stability if stress emerges in less transparent corners of the market.
As private capital increasingly fills the gap left by banks, oversight, data quality, and risk controls are becoming central issues for global regulators.