The Nonbank-Bank Nexus and the Shadow Banking System

Manmohan Singh and Zoltan Pozsar

No 2011/289, IMF Working Papers from International Monetary Fund

Abstract: The present way of thinking about financial intermediation does not fully incorporate the rise of asset managers as a major source of funding for banks through the shadow banking system. Asset managers are dominant sources of demand for non-M2 types of money and serve as source collateral ?mines' for the shadow banking system. Banks receive funding through the re-use of pledged collateral ?mined' from asset managers. Accounting for this, the size of the shadow banking system in the U.S. may be up to $25 trillion at year-end 2007 and $18 trillion at year-end 2010, higher than earlier estimates. In terms of policy, regulators will need to consider the re-use of pledged collateral when defining bank leverage ratios. Also, given asset managers' demand for non-M2 types of money, monitoring the shadow banking system will warrant closer attention well beyond the regulatory perimeter.

Keywords: WP; asset manager; asset; bank; holding company; securities; shadow banking system; rehypothecation; collateral; maturity transformation; securities lender; source collateral; assets of the bank; asset manger; bank X; Y. Thus FoF; off-balance sheet leverage; commercial paper; securities borrower; Commercial banks; Asset management; Shadow banking; Global (search for similar items in EconPapers)
Pages: 19
Date: 2011-12-01
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Citations: View citations in EconPapers (38)

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