since the crisis erupted, still more than 12 % of all loans extended by monetary and financial institutions ( mfis ) granted to euro area households are secured through euro area conduits, which hold €1. 9 trillion in assets. moreover, euro area bond funds hold almost a quarter of all outstanding debt securities issued by euro area non - financial corporates, while equity funds hold almost half a trillion in equities of euro area non - financial corporates. see igan and kang ( 2011 ) and kuttner and shim ( 2013 ). see : banking structures report, bankingstructuresreport201410. en. pdf. de fiore and uhlig ( 2015 ) reach a similar conclusion in a general equilibrium model where firms optimally chose among bank and non - bank sources of finance. see, among others, aoki and nikolov ( 2014 ) for an analysis of the implications of a growing shadow banking sector on financial stability. bis central bankers ’ speeches ecb, october 2014, https : / / www. ecb. europa. eu / pub / pdf / other / in addition, hedge funds and mixed funds provide additional funding to the real economy via off - balance sheet transactions, such as repos and credit commitments and otc derivatives. let me put a word of caution on the numbers i quoted. they refer only to assets held by money market funds, investment funds, financial vehicles corporations and some special purpose vehicles that are domiciled in the euro area. the figures would be much higher if we also had statistics on non - euro area shadow banking. they would be even higher if offbalance sheet activities, such as securities funding transactions and derivatives were accounted for. the recent substantial increase in the size of the shadow banking sector in the euro area was fostered by three factors. first, in an environment of globally low interest rates, among other financial institutions, investment funds and hedge funds were instrumental in the general search for yield. second, the supply of credit has been weak due to impaired banks ’ balance sheets, which led to the expansion of the unregulated credit market. third, a more stringent banking regulation in anticipation of the implementation of new capital and liquidity rules under basel iii could have, in itself, induced a shift of lending to the unregulated sector. from a financial stability perspective, a raise of the shadow banking sector may create systemic risks that need to be better understood and measured.

european emerging markets shows that tighter regulatory restrictions on non - core bank activities ( like bank involvement in securities markets, insurance, real estate, ownership of non - financial firms, etc. ) and higher minimum capital requirements are associated with lower bank lending standards abroad. 23 moreover, macro - prudential policy may leak due to regulatory arbitrage. credit could be provided to the economy via less capital - intensive channels, for instance via securitisation. 24 macro - prudential measures can also encourage the so - called “ race to the bottom ”, whereby capital and liquidity is moved around within the group to the country with the lowest requirements. in both cases, the shadow banking sector may play an important role in facilitating such a regulatory arbitrage measures can and should be envisaged to prevent “ regulatory leakages ” of macro - prudential policies. for instance, crd iv introduces automatic reciprocity for countercyclical capital buffer up to 2. 5 %. this means that if any of the eu countries introduces a countercyclical capital buffer to smoothen the financial cycle in its economy, all other eu countries are bound by law to impose the same capital surcharge on banks ’ cross - border exposures to the country introducing the measure. this prevents the so - called negative in - ward spillovers, whereby branches of foreign banks increase lending to circumvent the restrictions set by the macro - prudential authority on local banks. without reciprocity, macro - prudential policy is prone to leakages. ongena, popov and udell ( 2013 ). see zochowski ( 2014 ). bis central bankers ’ speeches 4. 3 enhancing the transparency of the shadow banking sector a third area where substantial progress needs to be made is the statistical treatment of the shadow banking sector. the ability of macro - prudential policy to address the risks materialising in the financial system is hindered by the opaqueness of that sector. a key priority for the ecb and the european system of central banks is to enhance its transparency and to develop a statistical system able to quantify its size, composition and risk exposure. a main challenge in measuring the role of shadow banking is to define a perimeter for the activities it performs. for the euro area, a measure can be obtained using the quarterly ecb / eurostat euro area accounts and the ecb ’ s monetary statistics. 25 however, measures of the size of the shadow