Surging Non-Bank Lending

Attack of the Shadow Banks

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Shadow banking is on the rise in Europe.
  • Why it matters

    Why it matters

    Despite overall weakness in the banking industry, credit funds are growing. Known as shadow banks, they benefit from being less strictly regulated than conventional banks.

  • Facts

    Facts

    • The market for non-bank financing grew to $560 billion by the end of July.
    • Although the United States remains the largest market, credit funds are also growing rapidly in Europe, where they now offer €38 billion in available funds.
    • Pension funds account for a third of the assets of credit funds.
  • Audio

    Audio

  • Pdf

“A single person falls in love through Parship once every 11 minutes.” Thanks to extensive marketing, this advertising slogan for the online dating site is now familiar to Germans nationwide.

But very few singles are aware of the owner of Parship, the financial investor Oakley Capital. Even less well known is the Permira lending fund, which financed the acquisition of Parship by the U.S. investor. But funds like these, known as debt funds, have been sharply on the rise in the last 12 months.

It’s the attack of the shadow banks. Debt funds, which are expanding rapidly, exploit the problems of traditional banks and are increasingly challenging them for their business with small- and mid-sized companies, collectively known as the Mittelstand.

Unlike banks, debt funds operate beyond the scope of public perception and with significantly fewer legal constraints. This has enabled these funds to achieve the kind of growth that is now rare in an industry largely in crisis mode, as evidenced by the almost daily reports about major German lenders like Commerzbank and Deutsche Bank.

The numbers are impressive. According to an analysis by the Alternative Credit Council (ACC) and consulting firm Deloitte, the market for financing outside the banking world had grown to a mind-boggling $560 billion (€502 billion) by the end of July, compared to $440 billion for all of 2015.

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