Financial risks ballooning in the shadow

Over the past 6 months we have seen an increase of risk and a risk rotation: issues are harder to monitor and to assess.

Negative interest rates are creating pockets of overvaluation of asset prices. Also, the banking industry is under a closer scrutiny, which has greatly benefited fund managers (mutual funds, exchange-traded funds, hedge funds and other institutional investors). They currently buy and sell 40% more securities than a decade ago: a total $76 trillion –the size of the world’s GDP.

The IMF has called for greater oversight of the so-called shadow banking business, including the introduction of stress tests for asset managers similar to the banking system’s. The US Securities and Exchange Commission is currently studying the request.