Member of the Supervisory Board of the European Central Bank (ECB), Elizabeth McCaul, has warned about shadow banking in a recent interview published on Wednesday by the Financial Times.
According to the ECB's representative, the "remarkable" increase in private funds and other sources coming from outside of the regulated banks is the biggest threat to the stability of the euro area's financial system. There are signs ahead, she added, the most clear, "is the area into which we likely have the least visibility and where things can move faster than . . . the normal credit dynamics — that is the non-bank financial intermediaries market."
McCaul also said there have been warning signs of how these risks could suddenly crystallize, including the collapse of family office Archegos Capital Management three years ago, which led to $10 billion in losses for investment banks such as Credit Suisse and Nomura.
