Summary of Financial Stability Policies for Shadow Banking

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Rating

8 Overall

9 Importance

8 Innovation

7 Style

Recommendation

Shadow banking is something everyone has heard of but few understand well. Roughly equal in size as an industry to traditional banking, shadow banking is indispensable in today’s financial system. While it has grown ad hoc in response to market needs, it now has the heft to potentially disrupt economies all over the world. getAbstract recommends this paper for its astute treatment of the topic of shadow banking and the regulation needed to deal with it.

In this summary, you will learn

  • What shadow banking entails,
  • How it poses risks to economic stability, and
  • What regulators can do to address and mitigate these risks.
 

About the Author

Tobias Adrian is a senior vice president of the Federal Reserve Bank of New York.

 

Summary

Shadow banking is “credit intermediation that involves entities and activities outside the regular banking system.” Its liabilities today equal more than 70% of US GDP, up from around 1% in 1960. Like its size, shadow banking’s systemic importance and its potential for harming the real economy are enormous...

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