Shadow banking in the euro area: risks and vulnerabilities in the investment fund sector

Bericht

This paper first highlights the structural features of shadow banking in the euro area, focussing on investment funds. It then discusses the potential systemic risks that the recent expansion of the investment fund sector presents. While investment funds provide important intermediation services to the real sector, including market and liquidity risk-sharing and the bridging of information gaps, their rapid expansion may present systemic risks that need to be detected, monitored and managed. In particular, the risk of fund outflows and the possible negative impacts on the wider financial system have risen due to the rapid expansion of the investment fund sector, its growing involvement in capital markets, its use of synthetic leverage, and the inherent and growing maturity and liquidity mismatch arising from the demandable nature of fund share investments. While available data suggest that vulnerabilities within the investment fund sector are growing and links to the wider financial system and real economy have strengthened, data limitations prevent drawing a definitive conclusion on the sectors' contribution to systemic risk.

Object Details

• ISBN: 978-92-899-2337-8
• Language: Englisch

References and Relationships

• Bibliographic citation: Series: ECB Occasional Paper ; No. 174

Classification and Topics

• Classification: Wirtschaft ; Financial Crises ; Financial Institutions and Services: General ; Pension Funds; Non-bank Financial Institutions; Financial Instruments; Institutional Investors ; Financial Institutions and Services: Government Policy and Regulation
• Subject: "shadow banking ; asset management ; financial stability ; interconnectedness" ; investment funds ; market liquidity ; systemic risk

Contributors, Places and Time

• Event: Geistige Schöpfung
• (who): Doyle, Nicola ; Hermans, Lieven ; Molitor, Philippe ; Weistroffer, Christian
• Event: Veröffentlichung
• (who): European Central Bank (ECB)
• (where): Frankfurt a. M.
• (when): 2016

Further information

• DOI: doi:10.2866/782178
• Handle: http://hdl.handle.net/10419/154627
• Last update: 10.03.2025, 11:43 AM CET