China is most often associated with ‘shadow banking’ mainly due to concerns over the stability of the country’s non-bank lenders, but the sector is growing globally. As banks have been forced to make tough decisions about how they operate, including reducing or ending some types of lending, investment companies are starting to fill the gap. Lending to corporate by the shadow sector is growing and the Fed chair Janet Yellen acknowledged recently that monitoring it is a “huge challenge”. The Chinese issue is one of bad loans; the shadow banking system has potential weakness which could cause a credit crisis in the country and have a damaging effect elsewhere. This could be felt here in real estate markets, with Chinese investment particularly strong in Chicago but also throughout the largest cities in the US and Canada. While traditional banks are facing increased regulation globally, the non-bank ‘shadow’ sector is likely to see continuing growth. Read the full story.
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