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Shadow banks or just not banks? Growth of the Swedish non-bank sector

Author

Listed:
  • Li, Jieying

    (Financial Stability Department, Central Bank of Sweden)

  • Myers, Samantha

    (Financial Stability Department, Central Bank of Sweden)

Abstract

The global non-bank sector has experienced significant growth since the global financial crisis, raising concerns that this shift represents a financial stability risk. We consider the drivers of this growth in Sweden: a small, open economy whose non-bank sector has grown rapidly. In contrast with the existing literature for the US, we find no evidence that growth in the Swedish non-bank sector is driven by regulatory arbitrage from banks. Instead, we find that the main drivers are the growing and increasingly complex pension investments, together with returns on global equity markets. While this provides some evidence that growth may be driven for search for yield, we also find that the non-bank sector appears to make its global investment choices on relatively conservative grounds. We conclude that trend-consistent growth may be driven by different factors depending on the jurisdiction. Our findings do not rule out financial stability risks, but further work is required to assess other channels by which these risks could propagate, including further analysis of cross border non-bank activities.

Suggested Citation

  • Li, Jieying & Myers, Samantha, 2025. "Shadow banks or just not banks? Growth of the Swedish non-bank sector," Working Paper Series 448, Sveriges Riksbank (Central Bank of Sweden).
  • Handle: RePEc:hhs:rbnkwp:0448
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    References listed on IDEAS

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    More about this item

    Keywords

    non-bank financial institutions; cross-border capital flows; shadow banking; regulatory arbitrage;
    All these keywords.

    JEL classification:

    • F32 - International Economics - - International Finance - - - Current Account Adjustment; Short-term Capital Movements
    • F41 - International Economics - - Macroeconomic Aspects of International Trade and Finance - - - Open Economy Macroeconomics
    • F44 - International Economics - - Macroeconomic Aspects of International Trade and Finance - - - International Business Cycles
    • G15 - Financial Economics - - General Financial Markets - - - International Financial Markets
    • G18 - Financial Economics - - General Financial Markets - - - Government Policy and Regulation
    • G22 - Financial Economics - - Financial Institutions and Services - - - Insurance; Insurance Companies; Actuarial Studies
    • G23 - Financial Economics - - Financial Institutions and Services - - - Non-bank Financial Institutions; Financial Instruments; Institutional Investors
    • G28 - Financial Economics - - Financial Institutions and Services - - - Government Policy and Regulation

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