Global regulators and economists warn of a data deficit to identify financial crisis risks. Companies are moving into the private sector, making it difficult to assess economic health.
Global regulators and economists are increasingly warning about a critical data deficit needed to identify the risks of the next financial crisis. Due to the massive transition of companies from public exchanges to the private sector and the flourishing of shadow lending, traditional indicators of economic health have ceased to reflect the real picture, forcing politicians to make fateful decisions in an information vacuum. This is reported by Bloomberg, writes UNN.
Details
The problem of information scarcity has worsened against the backdrop of a partial US government shutdown, when the Federal Reserve temporarily lost access to inflation and labor market statistics.
However, more systemic risks are hidden in private capital: the number of public companies in the US has halved in 20 years, while the number of "unicorns" – private startups worth over $1 billion – has exceeded 850 units.
Significant data gaps make it difficult for us and the market to understand where risks are accumulating, and therefore to predict stress
– stated Sarah Breeden, Deputy Governor for Financial Stability at the Bank of England.
Shadow Lending and Hidden Levers of Influence
Of particular concern is the private debt market, where borrowers are increasingly using complex instruments such as payments in kind (PIK). This allows companies to defer interest payments, which improves creditors' current balance sheets but masks real financial difficulties until default occurs. ECB and Fed supervisors emphasize that such opacity can lead to the "crystallization" of vulnerabilities only at the moment of a real market crash.
In addition, banks are actively financing shadow lenders – the volume of such liabilities has grown by 50% over the past five years, reaching $2.2 trillion. Experts compare the current situation with the period before the 2008 crisis, noting that back then regulators did not know where to look, and today they are simply deprived of the technical ability to investigate areas of toxic asset accumulation.
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