- the source for market opinions


July 24, 2023 | Moody’s: Financial Conditions Pose Growing Threat To Non-Banks

Danielle Park

Portfolio Manager and President of Venable Park Investment Counsel ( Ms Park is a financial analyst, attorney, finance author and regular guest on North American media. She is also the author of the best-selling myth-busting book "Juggling Dynamite: An insider's wisdom on money management, markets and wealth that lasts," and a popular daily financial blog:

A new report from Moody’s highlights the clear and present risks posed by “less regulated and transparent parts of the global financial system.” In particular, financial institutions carrying “more leverage, less liquidity and weak risk management will find it harder to navigate the cycle.” But wasn’t this time supposed to be different? See Shadow Banking Stress Lurks, Moody’s warns:

Tighter financial conditions make it tougher to generate strong returns and secure funding, the report noted.

These challenges are particularly acute for shadow banks that “adopted leverage-driven investment strategies or took on maturity risks when funding was inexpensive and abundant,” it said. Also, investment funds “face liquidity risks from redemption runs or margin calls triggered by falling asset values or weaker portfolio performance,” it said.

These issues could also spill over to the real economy, particularly in markets where shadow banks provide a larger share of funding to certain sectors, such as the small business and real estate sectors, which is the case in the U.S., the U.K., Korea and Brazil, Moody’s noted.

STAY INFORMED! Receive our Weekly Recap of thought provoking articles, podcasts, and radio delivered to your inbox for FREE! Sign up here for the Weekly Recap.

July 24th, 2023

Posted In: Juggling Dynamite

Post a Comment:

Your email address will not be published. Required fields are marked *

All Comments are moderated before appearing on the site


This site uses Akismet to reduce spam. Learn how your comment data is processed.