Institutional Cash Pools and the Triffin Dilemma of the U.S. Banking System

August 1, 2011

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Format: Chicago

Zoltan Pozsar. Institutional Cash Pools and the Triffin Dilemma of the U.S. Banking System, (USA: International Monetary Fund, 2011) accessed November 21, 2024

Disclaimer: This Working Paper should not be reported as representing the views of the IMF.The views expressed in this Working Paper are those of the author(s) and do not necessarily represent those of the IMF or IMF policy. Working Papers describe research in progress by the author(s) and are published to elicit comments and to further debate

Summary

Through the profiling of institutional cash pools, this paper explains the rise of the "shadow" banking system from a demand-side perspective. Explaining the rise of shadow banking from this angle paints a very different picture than the supply-side angle that views it as a story of banks' funding preferences and arbitrage. Institutional cash pools prefer to avoid too much unsecured exposure to banks even through insured deposits. Short-term government guaranteed securities are the next best choice, but their supply is insufficient. The shadow banking system arose to fill this vacuum. One way to manage the size of the shadow banking system is by adopting the supply management of Treasury bills as a macroprudential tool.

Subject: Bank deposits, Banking, Commercial banks, Currencies, Financial institutions, Financial services, Government liabilities, Money, Public financial management (PFM), Treasury bills and bonds

Keywords: Bank deposits, Cash, Cash pool, Cash pools' demand, Commercial banks, Currencies, Deposit, Global, Government liabilities, Institutional cash pools, Insurance limit, Insured deposit alternative, Macroprudential, Managed cash pools, Money, Money market fund, Portfolio allocation detail, Preferred habitat, Reinvestment pool, Shadow banking, Treasury bill, Treasury bills, Treasury bills and bonds, WP

Publication Details

Pages:

35
Volume:

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DOI:

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Issue:

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Series:

Working Paper No. 2011/190
Stock No:

WPIEA2011190
ISBN:

9781462307265
ISSN:

1018-5941

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