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Bafin boss Branson
Photo: Arne Dedert / dpa
Mark Branson urges tighter surveillance of gray areas in financial markets.
"The shadow banking sector has grown massively," said the President of the Federal Financial Supervisory Authority (Bafin) on Tuesday evening at the International Club of Frankfurt Business Journalists.
“Now is the time to tackle serious regulation.” Branson demanded “strong global regulation.”
Shadow banks are players in the financial markets who perform bank-like functions but are not banks and are therefore not subject to the regulation of credit institutions.
These include, for example, securitization companies, hedge funds, money market funds, pension funds and asset managers without a banking license.
Stricter regulation of this sector has been an issue since the 2007/2008 financial crisis.
Since then, however, stricter rules have been passed for traditional banks.
The search for higher yields in times of extremely low interest rates has allowed the shadow banking sector to grow by more than 50 percent in Europe alone in the past three years, Branson said.
»Of course, this development entails risks.
There is a risk of infection from this sector,” warned the Bafin boss.
Because shadow banks are not as heavily regulated as traditional banks, they may take on greater risks that can lead to high losses.
The bankruptcy of the multi-billion dollar US hedge fund Archegos in March 2021, for example, resulted in large losses for several large banks as its lenders.
"We shouldn't underestimate the dangers, even if parts of this sector are regulated," Branson said.
»This sector has grown extremely, there are more risks than in the past.«
Branson is also concerned about developments in the crypto market.
After the collapse of the FTX crypto exchange, a trading platform for digital currencies such as Bitcoin and Ether, in November of this year, investors are worried about billions in total.
“Maybe the collapse of this market came at the right time.
But now we have to learn the lessons,” Branson said.
"We shouldn't leave this unregulated in the hope that it dies out."
dab/dpa
