In a recent interview with the Financial Times, Elizabeth McCaul, a Member of the Supervisory Board at the European Central Bank (ECB), identified the rapid growth of non-bank financial intermediaries (NBFIs), or "shadow banks," as the single most significant threat to the Eurozone's financial stability.
These entities, which operate outside traditional regulatory frameworks, held €42.9 trillion in assets in the EU by late last year, surpassing the €38 trillion held by regulated banks. The sector's growth in recent years has been "remarkable" and "something that always worries us," McCaul said. "It is outside of the banking supervisory and regulatory perimeter," she added, stressing that the relationships between shadow banks and traditional banks create the potential for systemic risks.
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