- New report from the International Monetary Fund highlights the risks of non-bank finance, which helps hide debt levels in the financial system.
- The debt has shifted over to the so-called shadow banking system.
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The financial system is loaded up with a lot more debt than Wall Street wants you to know
The debt has shifted over to the so-called shadow banking system.
This means that "the omission of off-balance sheet items in the standard measures implies a substantial underestimation of bank leverage."
The IMF says "nonbank funding (households and wholesale) is on the rise since the Lehman-crisis, and constitutes a major source of bank credit to the economy."
The chart below offers a visual illustration of how the money flows through the system from the more regulated entities to the less closely-supervised ones.
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Barclays reported a total pledged collateral of £466 billion ($656.2 billion) in 2016, but only £34 billion ($47.88 billion) made it onto the balance sheet. The discrepancy is very large considering Barclays reported total on-balance sheet assets of £1.2 trillion ($1.47 trillion) in 2016.
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