Comments on: Shadow banking hangover still to come: James Saft Tue, 24 Mar 2015 16:54:45 +0000 hourly 1 By: JasonC2 Tue, 27 Nov 2012 05:27:50 +0000 If you read the original full report rather than the press accounts, you will find the “increase” in the shadow bank size estimate is due to wider coverage, not actual growth in its organic categories. Whole countries were not covered in the 2007 report, including sizable markets like Brazil and Hong Kong, but are included in the more recent figure.

You will also find they consider many things part of “shadow banks” that are not part of the usual sense of the term on the street. Specifically, they include mutual funds, even equity mutual funds, in that category. Only between half and two thirds of their total represent institutions most would consider “shadow banking”, under even the widest sense of the term (e.g. including all broker-dealer balance sheets).

In the US, the shadow banking system has fallen by half since the end of 2008, and total dollar debts outstanding have contracted by $3.4 trillion, almost entirely due to contraction in those line items. Meaning asset backed issuers, finance companies, and funding corporations. The other line item showing a large shrinkage is also a consumer of shadow banking paper – the money market fund industry.