17H·

How shadow banks are shaping the financial world - and why they are a risk ☁️💰

🥷 The term "shadow banks" sounds sinister - and to some extent it is. It refers to financial players that conduct bank-like transactions but are not subject to the same strict supervisory rules as traditional credit institutions. These include investment funds, hedge funds, private equity companies and special purpose vehicles for securitizing loans.

💪 Why did they become so powerful?

After the 2008 financial crisis, regulations for traditional banks were tightened worldwide, while more and more capital flowed into the less regulated sector - where higher returns beckoned. Today, it is estimated that shadow banks handle more than half of the global credit volume outside the traditional banking system.

However, their growing influence increases the systemic risk: if the sector comes under stress, for example due to liquidity bottlenecks or market distortions, shockwaves can shake the financial architecture. Shadow banks are part of the same capital flows, but without the stabilizing buffers of traditional banks.

Conclusion: Shadow banks fill important financing gaps, but at the same time act like an uncontrolled nervous system of the money market. Their growth makes the financial system more flexible - but also more fragile.

🏦 The best-known listed shadow banks include BlackRock $BLK (+0,04 %)KKR & Co. $KKR (-0,21 %) and Allianz $ALV (-0,67 %) :

➡️ BlackRock: The world's largest asset manager, managing over 13 trillion US dollars in capital. BlackRock acts as a financial intermediary and performs tasks such as lending, risk transfer and capital allocation - but without the strict banking regulation. It is precisely this size and systemic relevance that make BlackRock a shadow bank.

➡️ KKR & Co.: Originally a private equity firm, KKR now also lends directly to companies and uses complex financing structures - often with considerable leverage and without traditional deposit protection.

➡️ Allianz: Allianz is active as a massive lender and institutional manager through its asset management division PIMCO. Its activities in structured finance make it an important shadow bank outside the traditional banking system.

All three companies show how shadow banks today are not just niche players, but global market leaders with enormous systemic relevance, many of which operate outside of direct banking supervision.

💬 What do you think? Does global financial supervision urgently need more transparency in this gray market?

7 Commentaires

Seventrader@7Trader

17H

Blackrock and Allianz are not shadow banks......
Blackstone, Brookfield, Apollo, Ares etc. are, but not the two mentioned.

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All-in-or-nothing@All-in-or-nothing

15H

@7Trader At its core, PIMCO is not about Allianz as such😉.

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Bruce💎🙌@BruceBullridge

@7Trader I would be very interested to know why you disagree? According to the definition of a shadow bank, in my view the world's largest asset manager is absolutely part of this shadow banking system.
Allianz was referring to the PIMCO division, which in my view also belongs by definition.

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Max@Divident_e

16H

Blackrock shadow bank 😂😂😂😂 what a joke 🤡

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Bruce💎🙌@BruceBullridge

@Divident_e okay thanks, I'm glad I could make you smile 😆 why do you think Blackrock is not a shadow bank? Do you have a different definition for shadow banks?

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All-in-or-nothing@All-in-or-nothing

15H

Two things:

1. due to their systemic relevance and far-reaching interconnectedness, as well as the fact that they also have extensive activities in the private credit / private equity sector and move large volumes, the large asset managers are currently being DISCUSSED for classification or attribution to the shadow banking sector. From my point of view, they are exactly in the right place, as they are traditional activities that are highly regulated for banks and the players I mentioned are subject to much lighter regulation because they are not banks.

2. you can see from the comments that the topic of "shadow banks" is not really clear and accessible to most people who are not in contact with the subject matter (money laundering law, KYC, banking regulation). Your introduction says pretty much exactly what is meant by shadow banks. Basically, being classified as a shadow bank is nothing negative per se (but it is always associated as such by people who have no contact with the subject matter). From my professional experience, I can definitely say that there are countless banks worldwide (as we would define them as banks) that MUST be classified as shadow banks simply because they are based in countries that have lower regulatory requirements than the major regulators in the West.
western regulators Hemisphäre🤷🏼‍♂️.

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Bruce💎🙌@BruceBullridge

Thanks, I have checked my sources again. I had looked into the subject in more detail after the recent panic in the USA regarding the "regional banking crisis".

Of course, I interpreted the article in a somewhat gloomy way, which should encourage people to read it.

I was really surprised at how much unregulated money (compared to banks) is managed and used. Blackrock in particular is always said to have a lot of influence behind the scenes.

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