Shadow banking: non-bank intermediation has overtaken the banks

A crossover passed almost unnoticed. For the first time since the pandemic, non-bank financial institutions hold more than half of global financial assets. Hedge funds, money market funds, insurers, asset managers, private credit, securitisation vehicles: the old shadow banking now weighs $256.8 trillion and is growing twice as fast as the banks. Credit has migrated off the bank balance sheet, to where oversight is looser and data scarcer. Extending our pieces on repo, the basis trade and private credit, here is the overall map.

The term shadow banking, coined in 2007, originally described an opaque system that did credit like a bank, without its status or its safeguards. Regulators today prefer a less loaded and more precise expression, non-bank financial intermediation, or NBFI. The shift is not cosmetic: it marks the move from a hunt for suspect entities to a surveillance of activities, those that transform liquid savings into long-term credit, with leverage, outside the banking perimeter.

The measure: broad and narrow

The FSB keeps the reference count, across 29 jurisdictions covering more than 90% of world GDP. Its broad measure aggregates all financial institutions that are neither central banks, nor banks, nor public actors. In 2024, this perimeter grew by 9.4%, against 4.7% for the banking sector, reaching 51% of global financial assets. The most dynamic category, other financial intermediaries, which groups money market funds, hedge funds, investment funds and securitisation vehicles, jumped 11% to $169.4 trillion.

Alongside, the FSB tracks a narrow measure, more relevant for financial stability: the subset of activities that truly mimic bank credit and carry risks of the same nature, fragility to investor withdrawals or use of leverage. This narrow measure rose 12% in 2024, to $76.3 trillion, or 15.4% of global financial assets. It is this core that best matches the original idea of shadow banking.

Where the vulnerabilities are

Three fragilities recur in every analysis. Liquidity and maturity transformation first: an open-ended fund promises daily withdrawal while holding illiquid assets, which exposes it to forced sales in case of mass redemptions. Vehicles liable to suffer panic withdrawals weighed on their own $58 trillion in 2024, up 15%. Leverage next, concentrated in hedge funds, finance companies and securitisation vehicles, which amplifies shocks, as repo and the basis trade show. Interconnection finally, because non-banks and banks are tied by a thousand threads.

It is this last point, the bank and non-bank nexus, that the FSB has documented particularly this year. The links take three forms: non-banks place deposits with banks, banks grant them credit, repo and other exposures, and funds, insurers and pension funds hold securities issued by banks. In calm times, these links widen access to funding. In a crisis, they become channels of contagion.

The blind spot: private credit

The FSB report flags a major limit: the scarcity of data on private credit, in official statistics as in regulatory filings. This opacity is precisely the subject of our guide on private credit and our analysis of its silent contagion. When credit leaves the bank balance sheet for closed-end funds, finance companies and structured vehicles, it escapes detailed prudential reporting. The supervisor then sees an aggregate, not the detail of exposures or of nested leverage. The growth of hedge funds, up 19% in 2024 and concentrated mostly in the Cayman Islands, illustrates this migration toward less legible jurisdictions.

Why it matters

The non-bank system is not an evil in itself. It has widened access to credit, diversified funding sources and supported market liquidity. But it has shifted risk toward actors less capitalised, less watched, and tied to the banks by channels that tighten in a crisis. March 2020 and the unwinding of the basis trade, the 2022 crisis of leveraged UK pension funds, the episodes of stress on money market funds: every recent tremor came from this zone. With a narrow measure at $76.3 trillion and a growing dependence of credit on non-bank actors, the question is no longer whether this system is systemic, but whether it is sufficiently mapped to be supervised. On private credit, the FSB answers clearly that it is not.

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Primary sources: Financial Stability Board, Global Monitoring Report on Non-Bank Financial Intermediation 2025, published in December 2025 on 2024 data (broad measure at $256.8 trillion and 51 percent of global assets, other financial intermediaries at $169.4 trillion, narrow measure at $76.3 trillion, hedge-fund growth and the bank and non-bank nexus); European Central Bank and ESRB, EU Non-bank Financial Intermediation Risk Monitor 2025; Congressional Research Service, “Nonbank Financial Intermediation (NBFI or Shadow Banking) Policy Issues”; Bank for International Settlements, Aramonte, Schrimpf and Shin, “Non-bank financial intermediaries and financial stability”. Figures and dates verified one by one.