What is Shadow Banking?

February 11, 2014

Preview Citation

Format: Chicago

Stijn Claessens, and Lev Ratnovski. What is Shadow Banking?, (USA: International Monetary Fund, 2014) accessed December 3, 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

There is much confusion about what shadow banking is. Some equate it with securitization, others with non-traditional bank activities, and yet others with non-bank lending. Regardless, most think of shadow banking as activities that can create systemic risk. This paper proposes to describe shadow banking as “all financial activities, except traditional banking, which require a private or public backstop to operate”. Backstops can come in the form of franchise value of a bank or insurance company, or in the form of a government guarantee. The need for a backstop is in our view a crucial feature of shadow banking, which distinguishes it from the “usual” intermediated capital market activities, such as custodians, hedge funds, leasing companies, etc.

Subject: Asset and liability management, Banking, Capital markets, Financial markets, Financial sector policy and analysis, Financial services, Government liabilities, Liquidity, Public financial management (PFM), Shadow banking, Systemic risk

Keywords: Bank, Capital markets, Europe, External to the Shadow banking activity, Government liabilities, Lending, Liquidity, Liquidity service, List of Shadow banking activity, Policy, Regulation, Risk, Shadow Banking, Strips assets, Systemic risk, Type of Shadow banking activity, WP

Publication Details

Pages:

9
Volume:

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DOI:

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Issue:

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Series:

Working Paper No. 2014/025
Stock No:

WPIEA2014025
ISBN:

9781475597349
ISSN:

1018-5941

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