Shadow banking: It's a problem

A “shadow banking” crisis is looming if left unchecked and could potentially derail our financial markets and economy.

The reason for such concern is plain to see from the staggering numbers those institutions are now showing. Last year alone, non-banking financial institutions (NBFIs) gave out RM43bil in new personal financing facilities, up from 63.7% previously according to Bank Negara’s Financial Stability and Systems Report 2012. This is more than two times the loans disbursed by banks for personal loans at RM19.4bil for 2012. The central bank notes that such loans extended by the three largest NBFIs grew at a faster rate of 23.1% in 2012 versus 17.1% a year ago. That growth is faster than the 10.4% recorded by the entire banking sector.