38% of euro area financial assets are Shadow banking’s

“The shadow banking sector is an increasingly important provider of funding to the euro area economy,” explained the European Central Bank (ECB) in its latest report on financial structures. Shadow banking entities, including all financial intermediaries, except banks and ICPFs, like investment and/or monetary funds, represented financial assets worth €23,000 billion, increasing from 33% in 2009 to 38% of the total assets in late 2014.

“Over the past few years, growth in total euro area financial assets has been driven primarily by non-bank financial entities, while total banking assets have rebounded to levels last observed in 2008,” the ECB wrote. The situation is therefore ambivalent since non-banking funding grew more important in the funding of euro area growth but could also heighten risk because of its non-banking nature.

The ECB thinks such evolution positively participates in the economy and, despite a bit more caution, it doesn’t see the rapid growth of shadow banking – 3 percentage points higher in 2014 – as a risk factor that’d be more systemic than another.