Despite slow balance sheet growth, global banks are taking on new capital regulatory requirements.
So, the shadow-banking sector should also be handed new requirements, says a new CFA study on alternative banking channels.
- Banking errors push companies to seek alternatives
- Basel proposes beefed-up “shadow bank” rules, a regulatory report from 2013
The report calls for improved transparency and simplification in securities financing. That would include better management of collateral, and reformation of the securitization market—a CFA poll finds 55% of surveyed professional investors across the globe are looking for the standardization and simplification of issuance structures in markets.
In the wake of the financial crisis, shadow banking (in the form of lightly regulated financing vehicles) was seen as a potential systemic risk for the financial industry, says the CFA. And, today, the global shadow-banking sector is estimated to be worth approximately US$75 trillion, according to the Financial Stability Board.
But, “non-bank finance has the potential to [boost] financial markets in Europe and globally if the right measures are [taken] to stimulate demand and justify investor confidence,” explains Rhodri Preece, head of Capital Markets Policy EMEA at CFA Institute.
The study suggests shadow-banking regulations should be streamlined globally because major differences between European, U.S. and other countries’ rules could impede financial stability and investor protection.