Shadow Banking and Systemic Risk: In Search of Regulatory Solutions

Gianfranco A. Vento and Pasquale Ganga

Chapter 5 in Crisis, Risk and Stability in Financial Markets, 2013, pp 96-115 from Palgrave Macmillan

Abstract: Abstract Unlike ‘banking’ — normally associated with retail deposit-taking, and retail, commercial, and industrial loan-making financial intermediaries — ‘shadow banking’ represents a wide range of activities and entities for which there is currently no clear-cut and comprehensive definition. The different meanings available stress a heterogeneous number of factors, linking these financial intermediaries with the risks that they can generate for the overall financial system. Efforts to highlight what shadow banks are have been made by McCulley (2007), who underlined the high liquidity risk of such intermediaries due to the mismatch between assets and liabilities. According to Pozsar et al. (2010), who performed one of the most comprehensive studies on the topic within the Federal Reserve Bank of New York, the key difference between traditional banking and shadow banking lies in the absence of liquidity and credit puts provided by the public sector. They also provide a classification of the shadow banking system in three sub-systems (that is a government-sponsored shadow banking sub-system, an ‘internal’ shadow banking sub-system and an ‘external’ shadow banking sub-system), which has been taken as a milestone for further studies.

Keywords: Banking System; Systemic Risk; Hedge Fund; Traditional Bank; Shadow Banking (search for similar items in EconPapers)
Date: 2013
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Persistent link: https://EconPapers.repec.org/RePEc:pal:pmschp:978-1-137-00183-2_6

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DOI: 10.1057/9781137001832_6

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