Inside the World's Shadow Banking System
November 20, 2012 3:23 PM
Assets held by money market funds, private equity firms and other entities that make up the so-called shadow banking system stood at $67 trillion worldwide at the end of last year , according to new report by the Financial Stability Board. Supporters credit shadow banks with providing valuable services; critics warn that their lack of oversight poses systemic risk. One certainty is that they're big, with half as many assets as conventional banks, by FSB's count. Here's a look at how it defines shadow banks.(Image: Thinkstock)
Hedge Funds
Assets: $1.8 trillion worldwideThese lightly regulated investment vehicles have gained widespread popularity among institutional investors and wealthy individuals worldwide.(Image: Bloomberg News)
Private Equity Firms
Assets: $3 trillion worldwideTypically structured as partnerships, private equity funds seek to unlock unrealized value by acquiring underperforming private companies or public ones that they then take private and restructure.(Image: Bloomberg News)
Investment Companies
Assets: $24 trillion in worldwide 2011These include mutual funds, exchange-traded funds and other investment vehicles.(Image: Thinkstock)
Money Market Funds
Assets: $2.5 trillion in the U.S.These short-term fixed income investments compete with bank deposits but provide no government guarantees.(Image: Thinkstock)
Government-Sponsored Entities
Assets: Fannie Mae ($3.2 trillion), Freddie Mac ($2 trillion) and the Federal Home Loan Banks ($748 billion)GSEs offer financing to the U.S. housing market that has been characterized as both lowering the cost of financing and destabilizing the market. The GSEs were not included in the FSB report.(Image: Bloomberg News)
Structured Finance Vehicles
Assets: $5 trillion worldwideThese investment vehicles create securities from pools of assets such as loans, credit card receivables and bonds.(Image: Bloomberg News)
Credit Intermediaries
Assets: $9 trillion worldwideThese companies include mortgage and loan brokerages. They facilitate the issuance of credit by acting as clearinghouses, offering reserve services and cashing checks.(Image: Thinkstock)
