How shadow banking rules would hit Europe project finance

Author: Gemma Varriale | Published: 23 Apr 2013


· The landscape of infrastructure financing is rapidly evolving, with cash-strapped European banks retreating from long-term projects;

· As a result of this, and accelerating appetite among yield-hungry institutional investors, alternative financing is filling the funding void left by banks on infrastructure projects;

· However, there is concern the opaque nature of shadow banking means a credit bubble could appear;

· The resultant shadow banking regulations threaten to block an increasingly important source of funding for Europe’s projects, subjecting it to the same constraints that forced traditional banks to withdraw credit lines;

· But according to Standard & Poor’s, the risk-averse nature of institutional investors acts as a natural levelling factor, preventing excessive growth.

Institutional investors are set to lend $25 billion to projects in Europe in 2013, according to a recent Standard & Poor’s report. But,...