British regulators are concerned about the growth of the shadow banking system in the country. They have published a an initial integrated set of policy recommendations to strengthen oversight and regulation of the system. The Financial Stability Board (FSB) describes the banking system as as “credit intermediation involving entities and activities (fully or partially) outside the regular banking system” or non-bank credit intermediation in short.
The regulator registered that non-bank financial intermediation grew rapidly before the crisis (in parallel with the regular banking system), from an estimated $26 trillion in 2002 to $62 trillion in 2007. It has continued to increase since, although at a slower pace, to $67 trillion at end 2011.
The FSB has five main recommendations and propositions it believes are necessary to counter the potential risks of shadow banking. It drafted three consultative documents which outline its ideas and policy recommendations. Its main aims are to limit the spill over of shadow banking activities to the regular banking system and to define the systemic risks of an alternative banking system.
Comments are welcome until January 2013, and the final recommendations are expected to be published in September of the same year.
