30.05.2012
Financial market regulation

Insurance companies are not shadow banks

The European Commission plans to regulate the nature of shadow banking. This is the lesson from a recent Green Paper on the matter. The GDV supports this as long as it contributes to the stabilization of the financial system. But the definition of shadow banking requires clarification, as it is currently too wide. For no factual reason it includes every loaning activity outside of the regular banking sector.

Shadow banking should only comprise such credit activities which are not or only insufficiently regulated at the moment. The Financial Stability Board, however, would like to include activities in the definition of shadow banking which are already regulated outside of the regular banking sector. This would also include insurance companies. This approach is neither justified nor necessary. Insurers granting loans do not automatically become shadow banks.

The procedure of loan granting by German insurance companies is regulated by strict legal and supervisory rules as well as an effective supervision. Furthermore, the credit activities of German insurers are already transparent. Aside from comprehensive insurance-specific registration duties, the insurance companies also have to adhere to the large exposure notification duties of the banking sector.

Similarly to Basel III in the banking sector, the European insurance sector has created a complex supervisory regime with Solvency II. Thus, there are no gaps in insurance regulation which would need to be closed by regulation on shadow banking.

Insofar as there might be a necessity for a regulation concerning single participants or activities in the market, then it should be tied in with existing supervisory and regulation mechanisms. The affected actors and activities should generally be supervised and regulated individually.

The GDV’s complete position paper is available in the download section.