Balance Sheet Linkages Between Banks and Non-Banks Remain Stable

Monthly Monetary and Financial Statistics, December 2024, Country data and World and country group aggregates

(Contributors: Darja Milic, Aleksandra Alferova, and Abdulrahman Gweder)

In recent years, there has been growing concern about the interconnectedness between banks and non-bank financial corporations—such as investment funds, insurance corporations, and pension funds. This concern stems from the financial ties that exist between these two parts of the financial system (one that is highly regulated and the other that is less regulated) and how vulnerabilities in one sector could be transmitted into the other sector.

Throughout 2024, banks continued to rely on non-banks for a steady share of their funding needs, whether through debt securities, deposits, or loans. On average, about 7 percent of banks’ total funding globally comes from non-banks. This is noticeably higher than the amount of money banks lend to or invest in these entities (around 3 percent). While these amounts may not seem large in absolute terms, they may still create potential channels for risks to be transmitted from the non-bank sector into the banking system.

The level of reliance on non-bank funding differs widely between Advanced Economies (AEs) and Emerging Market and Developing Economies (EMDEs). In AEs, banks tend to receive a greater share of their funding from non-banks. This share grew slightly in 2024, nearly returning to pre-pandemic levels, reflecting the rising importance of non-banks in those financial systems. In contrast, banks in EMDEs receive less funding from non-banks, and that share has remained fairly stable over the last six years. However, there are notable differences by region—non-bank funding has increased in Sub-Saharan Africa, parts of Europe, and the Middle East, while it has declined in Latin America and Asia.

The funding channels between banks and non-banks are more diversified in AEs than in EDMEs. In AEs, debt securities made up over 30 percent of such funding by the end of 2024. In contrast, banks in EMDEs primarily receive funding from non-banks through deposits, followed by debt securities and loans. Among these, the most common are "other deposits" (those that can’t be easily withdrawn or transferred), which made up 45 percent of bank funding from non-banks at the end of 2024. That said, the overall share of all deposits has gradually declined—from 62 percent in early 2019 to 58 percent at the end of 2024.

Notes: The IMF MFS Dataset can be accessed the IMF Data Portal. The term “Banks” refers to Other Depository Corporations (ODCs), which include all financial institutions excluding the central bank that incur liabilities considered part of broad money. “Non-banks” pertains to Other Financial Corporations, which include non-MMF investment funds, various financial intermediaries (excluding insurance corporations and pension funds), financial auxiliaries, captive financial institutions, money lenders, insurance corporations, and pension funds. Financial assets and liabilities are defined according to the Monetary and Financial Statistics Manual and Compilation Guide. The dataset compilation utilizes a sample of 144 countries and territories, relying on the balance sheets of ODCs as source data. To address missing data, the most recent available data point for each country is applied. Additionally, ODC balance sheet entries are converted to US Dollars using nominal exchange rates, with any missing exchange rates imputed by carrying forward the available rates from prior periods.

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Global Merchandise Exports Increased in March 2025 Thanks to Both Advanced and Emerging Market and Developing Economies

(Contributors: Levan Karsaulidze and Huong Lan Vu)

Global trade expanded strongly before the rise in tariffs and other restrictive policies. Seasonally adjusted global merchandise exports increased by 2.6 percent month-on-month in March 2025, which is the highest growth rate in last 12 months. Exports from Emerging Markets and Developing Economies (EMDEs) rose by 3.9 percent, contributing 1.7 percentage points to the overall growth, while exports from Advanced Economies (AEs) increased by 1.5 percent and contributed 0.9 percentage points to the global growth. Exports from Emerging and Developing Asia rose by 6.9 percent, followed by Emerging and Developing Europe with 5.6 percent export growth, contributing 1.6 and 0.3 percentage points, respectively. Exports from Latin America and the Caribbean also increased, albeit with a marginal contribution to the overall growth. Conversely, exports from Sub-Saharan Africa and from Middle East and Central Asia declined by 5.1 and 1.3 percent, respectively, with each subtracting 0.1 percentage points from the world growth. In March 2025, global merchandise exports recorded a year-on-year increase of 6.3 percent, with EMDEs and AEs growing 7.2 and 5.2 percent, respectively.

Notes: Seasonally adjusted world and country group aggregates are derived from a sample of 109 economies that report monthly merchandise exports to the World Trade Organization/International Financial Statistics.

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