Yesterday, in a periodic repeat of what he says every 6 or so months, Jamie Dimon – devoid of other things to worry about – warned once again about the dangers hidden within the shadow banking system (the last time he warned about the exact same thing was in April of this year). The throat cancer patient and JPM CEO was speaking at the Institute of International Finance membership meeting in Washington, D.C., and delivered a mostly upbeat message: in fact when he said that the industry was “very close to resolving too big to fail” we couldn’t help but wonder if JPM would spin off Chase or Bear Stearns first. However, when he was asked what keeps him up at night, he said non-bank lending poses a danger “because no one is paying attention to it.” He said the system is “huge” and “growing.”
Dimon is right that the problem is huge and growing: according to the IMF which just two days earlier released an exhaustive report on the topic, shadow banking (which does not include the $600 trillion in notional mostly interest rate swap derivatives)Â amounts to over $70 trillion globally.
What he is very much wrong about is that nobody is paying attention to shadow banking: Zero Hedge has been covering the topic since early 2009.
Which is why we urge anyone who is curious to catch up on the issues surrounding non-bank lending, to read our 1,000+ articles on the topic.
However, for those who are time-strapped, here is a recent take from Bloomberg summarizing the IMF’s 192-page report on Shadow Banking released last week titled “Risk Taking, Liquidity, and Shadow Banking.”
In a summary of the report, the IMF estimated the shadow banking industry at $15 trillion to $25 trillion in the U.S.; $13.5 trillion to $22.5 trillion in the euro area; $2.5 trillion to $6 trillion in Japan; and about $7 trillion in emerging markets.
Not included in the summary were estimates of the size of shadow banking in countries including the U.K., and Gelos said later at a press conference said the industry globally exceeds $70 trillion, citing figures from the Financial Stability Board.
