Global financial watchdogs are sounding the alarm as the vast, less-regulated shadow banking sector has swelled to an unprecedented size, crossing the $250 trillion threshold for the first time. New data reveals this sprawling network now holds more than half of the world's financial assets, intensifying concerns about hidden vulnerabilities in the global system.
Unprecedented Growth in Non-Bank Sector
According to the latest annual global financial monitor from the Financial Stability Board (FSB), assets held by non-bank financial institutions reached a staggering $256.8 trillion by the end of 2024. This marks a significant year-on-year increase of 9.4%. The sector's share of total global financial assets has now climbed to 51%, returning to a level last seen before the COVID-19 pandemic.
The FSB, which brings together finance officials from 24 major jurisdictions, reported that growth within the traditional banking sector was far more subdued at just 4.7%. The most explosive expansion occurred in specific corners of the shadow banking world, with trust companies, hedge funds, money market funds, and other investment funds all posting double-digit growth rates.
Regulators Grapple with Critical Data Gaps
Despite the sector's colossal size, regulators admit they are operating with a dangerous lack of visibility, particularly into the booming private credit industry. The FSB highlighted a significant failure in its attempt to compile reliable data from eight major economies, including Canada, Germany, Japan, and Switzerland.
Officials found glaring inconsistencies and gaps, with those jurisdictions reporting only $0.5 trillion in private credit activity. The FSB bluntly stated this figure is "much lower than other estimates calculated with commercial data," citing problems like the absence of a standard global definition for private credit and incomplete reporting from national authorities.
FSB Chair and Bank of England Governor Andrew Bailey has repeatedly flagged the risks embedded in non-banks. He emphasized that understanding their rapid evolution is an "important focus" for global watchdogs as they assess the overall resilience of the financial system. This concern is echoed by prominent bank leaders like JPMorgan Chase's Jamie Dimon and UBS chair Colm Kelleher, who have publicly warned of vulnerabilities in the space.
Systemic Risks and the Path Forward
The milestone of $250 trillion in assets underscores a fundamental shift in where financial risk resides globally. The sheer scale of the shadow banking system, which operates with less regulatory oversight and transparency than traditional banks, poses a potential threat to economic stability during periods of market stress.
In response to the alarming data deficiencies, the FSB has committed to addressing the gaps in private credit monitoring as part of its 2026 work programme. The goal is to develop better tools and standardized reporting to bring this multi-trillion-dollar segment of finance into clearer view for regulators and policymakers worldwide.
The report serves as a stark reminder that as the formal banking sector faces stringent post-crisis rules, financial activity and risk have increasingly migrated to the less-lit corners of the global economy, creating new challenges for those tasked with preventing the next crisis.
