Introduction The comprehensive monitoring of the size, trends, risks and adaptations of shadow banking on a global scale is an important element in strengthening the oversight of this sector and of ultimately transforming shadow banking into resilient market-based financing. To this end the FSB coordinates an annual exercise of data collection, aggregation, and analysis of global trends and risks in the shadow banking system. This report is the fifth annual exercise by the FSB to identify the magnitude of and changes in the global shadow banking system, in other words the system of"credit intermediation involving entities and activities fully or partly outside the regular banking system'. The 2015 monitoring exercise covers 26 jurisdictions, 7 including Ireland for the first time and the euro area as a whole. The exercise may be expanded to include additional jurisdictions in future. It uses annual data through the end of 2014 provided by national jurisdictions for the 2015 exercise based on the balance sheets of the financial system, as recorded in national financial accounts (e.g."Flow of Funds"), and also contains other supervisory data and private sector data sources. A network of representatives from participating jurisdictions was established to coordinate the shadow banking data collection Section 2 of this report introduces a new measure of shadow banking based on economic functions (or activities), which builds on the FSBs high-level Policy Framework for Strengthening Oversight and Regulation of Shadow Banking Entities(hereafter the Policy Framework) developed by the FSB in 2013. 8 Section 3 provides an assessment of inherent in the activities of shadow banking entities and also considers risks arising from the interconnectedness between banks and Other Financial Intermediaries(OFIs). OFIs comprise all financial intermediaries that are not classified as banks, insurance companies, pension unds, public financial institutions, central banks, or financial auxiliaries. Section 4 presents a broader perspective by looking at the size and trends of all non-bank financial intermediation This broader"macro-mapping" has been the focus of previous years'exercises and is updated in this report to include data through the end of 2014. Finally, Section 5 examines new data collected on credit intermediation undertaken by entities within the financial system to assess potential shifts in the providers of credit to the economy 2. A measure of shadow banking based on economic functions For the first time, this year's report offers an assessment of shadow banking across the major financial systems based on economic functions(or activities ). The approach is based on the classification of non-bank financial entities into five economic functions. each of which 16 FSB: Transforming Shadow Banking into Resilient Market-based Financing, an Overview of Progress and a roadmap for2015,14November2014,seehttp://www.fsb.org/wp-content/uploads/r121118.pdf 17 These are: Argentina, Australia, Brazil, Canada, Chile, China, France, Germany, Hong Kong, India, Indonesia, Ireland United States, and United Kingdom. While the scope of the report has been extended compared to previous years, there are other jurisdictions with significant shadow banking activities which are not, as yet, directly participating in the shadow banking monitoring exercise FSB: Policy Framework for Strengthening Oversight and Regulation of Shadow Banking Entities, 29 August 2013, se http://www.fsborg/wp-content/uploads/r130829c.pdf.6 1. Introduction The comprehensive monitoring of the size, trends, risks and adaptations of shadow banking on a global scale is an important element in strengthening the oversight of this sector and of ultimately transforming shadow banking into resilient market-based financing. To this end, the FSB coordinates an annual exercise of data collection, aggregation, and analysis of global trends and risks in the shadow banking system. This report is the fifth annual exercise by the FSB to identify the magnitude of and changes in the global shadow banking system, in other words the system of “credit intermediation involving entities and activities fully or partly outside the regular banking system”.16 The 2015 monitoring exercise covers 26 jurisdictions, 17 including Ireland for the first time, and the euro area as a whole. The exercise may be expanded to include additional jurisdictions in future. It uses annual data through the end of 2014 provided by national jurisdictions for the 2015 exercise based on the balance sheets of the financial system, as recorded in national financial accounts (e.g. “Flow of Funds”), and also contains other supervisory data and private sector data sources. A network of representatives from participating jurisdictions was established to coordinate the shadow banking data collection. Section 2 of this report introduces a new measure of shadow banking based on economic functions (or activities), which builds on the FSB’s high-level Policy Framework for Strengthening Oversight and Regulation of Shadow Banking Entities (hereafter the Policy Framework) developed by the FSB in 2013. 18 Section 3 provides an assessment of the risks inherent in the activities of shadow banking entities and also considers risks arising from the interconnectedness between banks and Other Financial Intermediaries (OFIs). OFIs comprise all financial intermediaries that are not classified as banks, insurance companies, pension funds, public financial institutions, central banks, or financial auxiliaries. Section 4 presents a broader perspective by looking at the size and trends of all non-bank financial intermediation. This broader “macro-mapping” has been the focus of previous years’ exercises and is updated in this report to include data through the end of 2014. Finally, Section 5 examines new data collected on credit intermediation undertaken by entities within the financial system to assess potential shifts in the providers of credit to the economy. 2. A measure of shadow banking based on economic functions For the first time, this year’s report offers an assessment of shadow banking across the major financial systems based on economic functions (or activities). The approach is based on the classification of non-bank financial entities into five economic functions, each of which 16 FSB: Transforming Shadow Banking into Resilient Market-based Financing, an Overview of Progress and a Roadmap for 2015, 14 November 2014, see: http://www.fsb.org/wp-content/uploads/r_121118.pdf. 17 These are: Argentina, Australia, Brazil, Canada, Chile, China, France, Germany, Hong Kong, India, Indonesia, Ireland, Italy, Japan, Korea, Mexico, Netherlands, Russia, Saudi Arabia, Singapore, South Africa, Spain, Switzerland, Turkey, United States, and United Kingdom. While the scope of the report has been extended compared to previous years, there are other jurisdictions with significant shadow banking activities which are not, as yet, directly participating in the shadow banking monitoring exercise. 18 FSB: Policy Framework for Strengthening Oversight and Regulation of Shadow Banking Entities, 29 August 2013, see: http://www.fsb.org/wp-content/uploads/r_130829c.pdf