Shadow banking no more? Banks are at the core of Non-bank financial intermediation (NBFI)

18 December 2025 - 00:01 h

Press Release

New mapping report shows rapid growth of non-bank financial institutions (NBFIs) driven by banks’ balance sheet strategies.

Non-bank financial institutions, including insurers, fund managers and other financial intermediaries, now control over half of global financial assets ($256.8 trillion), but the term ‘non-bank’ is misleading. Banks remain central to NBFI activities, providing layered financing, structuring complex transactions, and creating interconnected exposures that amplify systemic risk.

Shadow banking is not a parallel system, or a safety valve. It is built around banks. Much of the growth in NBFI comes from banks shifting activity towards less-regulated parts of the financial system. The idea that risk can be redistributed to the non-bank sector and that this sector can absorb unlimited risk is inherently flawed. Risks that are ‘out of sight, out of mind’ may once again come back to haunt the very core of the financial system.

Christian M. Stiefmueller

Non-bank financial actors often use high leverage and short-term borrowing to finance positions. These strategies boost returns in normal times but can magnify stress across the system in a downturn.

When stress hits, leverage transmits risks rapidly across the vast, tightly interconnected network of bank and non-bank actors. The whole system can become fragile at once, and supervisors still do not have a comprehensive view of the potential channels of contagion.

Christian M. Stiefmueller

The report reflects recent warnings from the IMF, FSB, ECB, and ESRB that gaps in data and visibility prevent a full understanding of vulnerabilities in Non-Bank Financial Institutions. These authorities have highlighted the combination of rapid growth, high leverage, liquidity mismatches and strong interconnectedness as a growing source of risk to financial stability.

A second volume, to be published early next year, will highlight specific risk factors related to the growth and interconnectedness of NBFIs and make recommendations for the regulatory response.

Full Report (In English)