ECB is targeting shadow banks after market turbulence – Diepresse.com
In view of the latest market turbulence, the ECB warns of the dangers that can assume shadow banks.
In the past few days, it was seen that the potential for abrupt course corrections remains high due to geopolitical uncertainties, said ECB-Banken supervisor Sharon Donnery on Thursday at an event in Greek Delphi.
« Since non-banks are among those who could feel geopolitical stress, their integration with banks is a special reason to worry, » said Donnery. She called on to supervise such financial companies more. It must be ensured that they are prepared when it comes to liquidity if there are demands for additives.
Shadow banks have grown strongly since the financial crisis
The shadow banks include hedge funds, money market funds, special stockbrokers and other financial service providers that offer financial transactions like banks. The industry has grown sharply since the global financial crisis in 2008, but is still subject to a more smooth regulation compared to the classic banks. Also, such financial companies have no access to the credit transactions of the central banks through which the banking industry can get funds. In the case of market turbulence that can lead to liquidity problems, they are therefore more vulnerable.
Due to the expansion of the shadow banking sector, Donnery has also increased the interweaving with classic banks in the financial sector, which has potential risks to the financial stability. Money houses are often connected directly to such non-banks due to their credit and investment activities. Financial institutions are therefore susceptible to shocks who originate in the shadow bank sector. The complexity and opaque of some activities of shadow banks could also disguise risk concentrations. According to Donnery, banks and supervisors have to improve their surveillance measures due to these dynamics. (APA)
