Financial Innovation and Shadow Banking

Luc Laeven

Chapter 12 in The Social Value of the Financial Sector:Too Big to Fail or Just Too Big?, 2013, pp 229-235 from World Scientific Publishing Co. Pte. Ltd.

Abstract: AbstractThere are bright and dark sides to financial innovation. On the bright side, financial innovations that improve screening and monitoring can facilitate the allocation of resources by financial intermediaries to their most productive use (Greenwood, Sanchez, and Wang, 2010; Laeven, Levine, and Michalopoulos, 2012). Notable examples of such productive forms of financial innovation in the past include credit bureaus and venture capital. Financial innovations that improve risk-sharing can, in principle, also be welfare enhancing. A good example is derivatives in their various forms and colors. However, financial innovations can be “deadly weapons” if abused, allowing financial institutions to further boost excessive leverage and contributing to systemic risk. The same derivatives that can improve risk-sharing can also harbor very large tail risks that can jeopardize individual financial intermediaries that engage in ill-managed derivatives trades and with it the entire financial system…

Keywords: Depository Institutions; Banks; Too-Big-to-Fail; Financial Innovations (search for similar items in EconPapers)
Date: 2013
References: Add references at CitEc
Citations: View citations in EconPapers (1)

Downloads: (external link)
https://www.worldscientific.com/doi/pdf/10.1142/9789814520294_0012 (application/pdf)
https://www.worldscientific.com/doi/abs/10.1142/9789814520294_0012 (text/html)
Ebook Access is available upon purchase.

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:wsi:wschap:9789814520294_0012

Ordering information: This item can be ordered from

Access Statistics for this chapter

More chapters in World Scientific Book Chapters from World Scientific Publishing Co. Pte. Ltd.
Bibliographic data for series maintained by Tai Tone Lim ().