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Does Shadow Banking Affect Singapore?
#1
Singapore's shadow banking sector is small, posing no significant risk to the financial system, but regulators say they are keeping a close watch on it.

Governments around the world have become increasingly concerned about this unofficial alternative banking scene in recent years.

The worry is that as they tighten the screws on traditional lenders, borrowers might turn to creditors operating outside the regular banking system, able to bypass controls and capital requirements.

In China, for example, the government has been taking steps to rein in the huge shadow banking sector, which ANZ Bank has estimated to be as big as 12 to 13 per cent of the size of the regulated banking system.

To map out the potential shadow banking sector here, the Monetary Authority of Singapore (MAS) initially included non-bank financial entities such as hedge funds, private equity funds and broker-dealers into its study, before narrowing its focus to those that provide credit.

The MAS excluded pawn brokers and licensed money lenders from its study, as their total assets are very small - about 0.07 per cent of total financial system assets.

Using the assets of the non-bank financial entities as a proxy, the MAS estimated that the size of Singapore's potential shadow banking system is about $923.7 billion - small compared with $3.5 trillion for the overall financial system in Singapore. It is also a fraction of the $86.8 trillion global shadow banking system.

The MAS looked at the practices of these non-bank organisations, such as whether they took on high levels of debt or transferred their credit risk to others.

It also studied whether they had strong links to the regulated banking system, as a high level of interconnectedness could lead to wider contagion.

In short, the MAS found these non-bank organisations do not pose significant risks on any of these fronts. Most of their assets are not credit instruments and they do not take on much debt.

"Funds managed in Singapore generally take on little leverage, investing using mainly the monies raised from investors," the MAS noted.

Their links with the regular banking system are also limited - they account for only 2.4 per cent of banks' total deposits, 1.7 per cent of their loans and 1.2 per cent of their derivative transactions.

Banks' guarantees to and investments in these non-bank financial entities are also insignificant.

Nonetheless, the MAS said it will continue to watch out for potential shadow-banking risks in Singapore and that it has recommended measures to strengthen the regulation of the global shadow banking system, in collaboration with other international standard-setting bodies.
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#2
This is the first time I heard about shadow banking.
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#3
(10-10-2016, 10:25 AM)Jessica Wrote: This is the first time I heard about shadow banking.

That is why it is called "shadow" banking.

Only the employee know what are they actually doing with their funds. There is no transparency and they only serve a certain exclusive group of customers.
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#4
Nice reply Sherry.....
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