Fed Survey: Hedge Funds and the Shadow Banking System

Date: Monday, October 18, 2010
Author: Alex Akesson, HedgeCo.net

The new Fed’s Senior Credit Officer Opinion survey (FSCOO), modeled after the better-known Senior Loan Officer Survey (SLOS), showed that hedge funds, private-equity firms, insurance companies and other big investors got better terms from lenders during the summer months, 2010.

The SLOS tracks traditional bank lending to households and companies, taking a look at the shadow-banking system, which plays an important role in getting credit to firms and individuals, as highlighted by the financial crisis, which saw a significant amount of lending move outside the traditional banking sector.

“Dealers indicated that they had loosened credit terms offered to each of the distinct classes of counterparties–including hedge funds and other private pools of capital, insurance companies and other institutional investors, and nonfinancial firms,” the Fed report said.

By contrast, there was little change in credit terms and conditions in over- the-counter derivatives markets during the period. The central bank’s survey was conducted from Aug. 16 to Sept. 3 and polled 20 of the largest financial institutions in the country. The main questions involved changes between June, when the first such survey was conducted, and August, 2010.

Alex Akesson
Editor for HedgeCo.net
alex@hedgeco.net