The global activities of the Non-Bank Financial Intermediation (Nbfi) sector fall by 5.5 per cent to 218 trillion dollars in 2022. This was the first notable decrease since 2009 and can be largely attributed to higher interest rates.
The total financial assets of the sector declined mainly due to valuation losses in mark-to-market asset portfolios, particularly in Investment Funds. Despite this decrease, the value of the Nbfi sector is still higher than that of banks, central banks, and public institutions.
Covered under the umbrella of Nbfi, Shadow Banking is founded on a move from classic sources, such as savers’ deposits or bond issuance, to securing resources in the capital market, with innovative mechanisms and products.
The financial crisis of 2008-2009 indeed led to increased regulation and oversight of the banking sector, which in turn contributed to the growth of the Shadow Banking sector. This created a polarization in the financial system, with one part being heavily regulated and the other part being less regulated and more oriented towards NBFI sector.
The recent decrease in Shadow Banking activities could indeed suggest a shift towards a more balanced system but the impact of political factors cannot be underestimated either. Policy decisions, regulatory changes, and geopolitical events can significantly influence the trajectory of the NBFI sector.