Brussels, 02/10/2014 (Agence Europe) - On 1 October, the IMF called on the political decision-makers to minimise the risks posed by the parallel banking sector, or “shadow banking”, which is in an excessive growth situation, according to the Washington-based institution.
In a report, the IMF stresses that players on this market, such as monetary funds, are not subject to any regulations. Yet the amounts which transit through it currently stand at $60,000 billion. The eurozone is believed to be exposed at a level of between $13,500 and $22,500 billion. The IMF adds that monetary funds in the eurozone seem “more directly connected with banks” than those in the United States and Japan. Although this shadow banking system can be beneficial, this does not mean that it is not without risks for financial stability. The IMF takes the view that international cooperation will be necessary to prevent tightening in one member state from leading to a migration from this market to less strict countries.
European Commissioner for the Financial Markets Michel Barnier presented a proposed regulation on monetary funds in September 2013. Over at the European Parliament, despite the best efforts of the rapporteur then in charge of the dossier, no common position could be reached on the proposal. Neena Gill (S&D, UK) has taken up the cause. “I want to be sure that there is a format which allows these funds to continue to exist”, she explained, whilst the Commission's proposal to require funds which offer constant remuneration (CNAV, or constant net asset value) to have a cash buffer has been seen by the industry as likely to kill off the sector. Gill does not want investors to think that if something goes wrong, governments will step in and finance it. (EL)