Korea is reportedly to be the 7th largest country in shadow financing in comparison with GDP. The rate of increase is said to be accelerating each year.
According to an annual report titled “Global Shadow Banking Monitoring Report 2013” published by the Financial Stability Board (FSB) on November 14 (local time), Korea saw a year-on-year increase of 15% in shadow financing last year, up more than 5% from 2011. As a result, the country moved up 5 spots to 9th in 2012. Previously, it occupied 14th place in the FSB’s 2012 report, which rated nations based on the average annual growth rate of shadow financing over the period of 2007–2011.
Korea’s shadow financing vis-à-vis GDP is also increasing. The FSB reported that total shadow financing in the nation amounted to about 100% of GDP in 2012. Its ranking edged up by one place from 8th in 2011 to 7th in 2012. The total amount was 1.511 quadrillion won (US$1.42 trillion).
China is the country with the highest growth rate of shadow financing, recording a 42% year-on-year increase. Argentina, India, the Republic of South Africa, and Russia grew more than 20% year-on-year.
Meanwhile, the United States had the largest shadow banking system with assets of US$27 trillion in 2012, comprising 37% of the total. The next spot was taken by the Eurozone (17 countries) with US$22 trillion, followed by the UK (US$9 trillion), and then Japan (US$4 trillion).
The shadow banking system refers to transactions of or between financial institutions that are less regulated than banks despite having similar functions. These include hedge funds, money market funds (MMFs), and repurchase agreements (repos).
The findings in the FSB’s report are based on data of shadow banking systems in 25 jurisdictions and the Eurozone as a whole, which make up 80% of the total global GDP and 90% of the total financial assets in the world.