Three global themes emerge based on MGI's analysis of the global financial stock, the financial capital available for intermediation.
First, the development and expansion of financial institutions such as banks and stock markets far outpaces the growth in underlying GDP, resulting in financial deepening. While the global financial stock was similar in size to the world's GDP in 1980, today it is more than three times larger. Financial deepening is usually beneficial, giving households and businesses more choices for investing their savings and raising capital as well as promoting a more efficient allocation of capital and risk.
Second, debt securities are the most important asset class in the global financial stock. They hold the largest share of GFS and have been steadily expanding over time. The relative role of private and government securities varies across geographies; for example, government debt is a relatively small share of the U.S.'s and the UK's financial stock, but dominates Japan's.
Third, the roles of the different regions in the GCM are shifting, reflecting the profound contrasts in size, composition, growth, and degree of integration. The U.S. maintains a unique role as the hub for GCM, which bolsters its dominance in private debt and equity securities. Europe is integrating quickly and is gaining global share across all asset classes. Japan's global role is diminishing in all assets but government debt, which has driven most of Japan's growth in financial stock. And China, while still relatively small in the GCM, controls a meaningful share of global bank deposits.
