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Shadow Banking and Systemic Risk: In Search of Regulatory Solutions

In: Crisis, Risk and Stability in Financial Markets

Author

Listed:
  • Gianfranco A. Vento
  • Pasquale Ganga

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.

Suggested Citation

  • Gianfranco A. Vento & Pasquale Ganga, 2013. "Shadow Banking and Systemic Risk: In Search of Regulatory Solutions," Palgrave Macmillan Studies in Banking and Financial Institutions, in: Juan Fernández Guevara Radoselovics & José Manuel Pastor Monsálvez (ed.), Crisis, Risk and Stability in Financial Markets, chapter 5, pages 96-115, Palgrave Macmillan.
    • Handle: RePEc:pal:pmschp:978-1-137-00183-2_6
    DOI: 10.1057/9781137001832_6
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    Cited by:

    1. Krug, Sebastian & Wohltmann, Hans-Werner, 2016. "Shadow banking, financial regulation and animal spirits: An ACE approach," Economics Working Papers 2016-08, Christian-Albrechts-University of Kiel, Department of Economics.

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