Shadow banks or just not banks? Growth of the Swedish non-bank sector

Jieying Li () and Samantha Myers ()
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Jieying Li: Financial Stability Department, Central Bank of Sweden, Postal: Sveriges Riksbank, SE-103 37 Stockholm, Sweden
Samantha Myers: Financial Stability Department, Central Bank of Sweden, Postal: Sveriges Riksbank, SE-103 37 Stockholm, Sweden

No 448, Working Paper Series from Sveriges Riksbank (Central Bank of Sweden)

Abstract: The global non-bank sector has experienced significant growth since the global financial crisis, raising concerns that this shift represents a financial stability risk. We consider the drivers of this growth in Sweden: a small, open economy whose non-bank sector has grown rapidly. In contrast with the existing literature for the US, we find no evidence that growth in the Swedish non-bank sector is driven by regulatory arbitrage from banks. Instead, we find that the main drivers are the growing and increasingly complex pension investments, together with returns on global equity markets. While this provides some evidence that growth may be driven for search for yield, we also find that the non-bank sector appears to make its global investment choices on relatively conservative grounds. We conclude that trend-consistent growth may be driven by different factors depending on the jurisdiction. Our findings do not rule out financial stability risks, but further work is required to assess other channels by which these risks could propagate, including further analysis of cross border non-bank activities.

Keywords: non-bank financial institutions; cross-border capital flows; shadow banking; regulatory arbitrage (search for similar items in EconPapers)
JEL-codes: F32 F41 F44 G15 G18 G22 G23 G28 (search for similar items in EconPapers)
Pages: 46 pages
Date: 2025-02-01
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