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The Financial Crisis and the Global Shadow Banking System1

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  • Farhi, Maryse
  • Cintra, Marcos Antonio Macedo

Abstract

The financial crisis triggered by increasing default rate, real estate devaluation and financial asset depreciation associated with the US subprime mortgages brought back the debate about the framework of the US and international financial systems, their potential systemic risks, and their regulatory and supervisory mechanisms. Credit derivatives and structured products backed by real estate credit replicated and multiplied risks by an unknown factor besides redistributing them at a global scale. A large number of poorly regulated and badly supervised financial institutions – no capital requirements, no access to deposit insurances, rediscount operations, and last resort credit lines by central banks – became the counterparty of the credit risk transfer from the banking system and started to hold increasing risks. The intermingling of these institutions and markets engendered a global shadow banking systems and markets.

Suggested Citation

  • Farhi, Maryse & Cintra, Marcos Antonio Macedo, 2009. "The Financial Crisis and the Global Shadow Banking System1," Revue de la Régulation - Capitalisme, institutions, pouvoirs, Association Recherche et Régulation, vol. 5.
    • Handle: RePEc:rvr:journl:2009:7473
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    References listed on IDEAS

    as
    1. Guttmann, Robert, 2008. "A Primer on Finance-Led Capitalism and Its Crisis," Revue de la Régulation - Capitalisme, institutions, pouvoirs, Association Recherche et Régulation, vol. 3.
    2. Sonia Ondo Ndong & Laurence Scialom, 2009. "Northern Rock: The Anatomy of a Crisis—The Prudential Lessons," Palgrave Macmillan Books, in: Robert R. Bliss & George G. Kaufman (ed.), Financial Institutions and Markets, chapter 3, pages 51-74, Palgrave Macmillan.
    3. Jan Kregel, 2008. "Minsky’s Cushions of Safety: Systemic Risk and the Crisis in the U.S. Subprime Mortgage Market," Economics Public Policy Brief Archive ppb_93, Levy Economics Institute.
    4. Robert Guttmann, 2016. "Finance-Led Capitalism," Palgrave Macmillan Books, Palgrave Macmillan, number 978-1-137-52989-3, December.
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    Cited by:

    1. Lahille, Eric, 2014. "Le rôle du mode de régulation politique états-unien dans le déclenchement de la crise économique," Revue de la Régulation - Capitalisme, institutions, pouvoirs, Association Recherche et Régulation, vol. 16.
    2. Daniela M. Prates & Maryse Farhi, 2015. "The shadow banking system and the new phase of the money manager capitalism," Journal of Post Keynesian Economics, Taylor & Francis Journals, vol. 37(4), pages 568-589, May.

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    More about this item

    Keywords

    banks; brokerage; financial crisis; investment banking; mortgages; ratings agencies; agences d’évaluation; banques; banques d’investissement; courtage; Crise financière; hypothèques;
    All these keywords.

    JEL classification:

    • G01 - Financial Economics - - General - - - Financial Crises
    • G21 - Financial Economics - - Financial Institutions and Services - - - Banks; Other Depository Institutions; Micro Finance Institutions; Mortgages
    • G24 - Financial Economics - - Financial Institutions and Services - - - Investment Banking; Venture Capital; Brokerage

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