'Shadow banking' set for breakout year in 2015

Shadow banking set for breakout year in 2015

As traditional banks face tighter restrictions and the demand for credit grows, a clear winner is beginning to emerge.

Recovering from the black eye it received during the dark days of the financial crisis, the unregulated shadow banking system continues to gather both assets and attention, the latter from industry insiders who believe the climate is right for strong growth ahead.

A recent report from the Financial Stability Board put assets for nonbank lending institutions at $75 trillion after growing more than 7 percent in 2013.

While the FSB has been pushing hard for new rules governing shadow banks, most focus on reporting requirements so regulators can get a better understanding of how much risk is posed to the broader banking system. The board believes it's important, though, to maintain a healthy industry

"The current regulatory reform agenda, led by the FSB, has yielded important progress. However, many of the agreed principles have not yet been implemented nationally," the board wrote in its Global Financial Stability Report. "The challenge for policymakers is to strike the right balance between containing systemic vulnerabilities related to shadow banking risks and preserving the benefits of shadow banks."

Shadow banking came under a negative light during the crisis for helping to spur low-quality loans as well as the securitization process that sold bundles of those debt products to investors craving the higher yields they provided.