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ICFR Regulatory Briefing on Shadow Banking  

ICFR Shadow Banking Resource Centre


The financial crisis highlighted the extent to which unregulated non-bank financial activity can impact both the banking system and the broader economy. However, dealing with activities which fall outside the regulated banking system is providing headaches for regulators. ‘Shadow banking’ can be defined in various ways, but it is unclear whether activity referred to as shadow banking makes up a discrete sector of the financial system analogous to, for instance, the banking sector, or the insurance sector. Indeed, the diversity of activities which are said to comprise shadow banking may mean that regulatory initiatives are more fragmented than the catch-all name suggests.

Engaging in the shadow banking debate therefore raises one issue immediately: the term ‘shadow banking’ itself is widely used, but not universally accepted as legitimate. As with any technical term or jargon, its qualified use can be helpful, when it is clear what is being discussed, and which definitions are being employed. However, it sometimes appears that shadow banking is used as an umbrella term for activities which do not share much in common, let alone in terms of the risks they pose to financial stability or regulatory measures which might be directed at them. There is a rich variety of non-bank financial intermediation which takes place in the global economy, and much of this was not implicated in the financial crisis. Becoming clear about which activities deserve the somewhat pejorative label ‘shadow banking’, and which are simply alternative, non-bank financial intermediation, is crucial if we are to strike the right balance between allowing the financial system to intermediate according to the economy’s need, and financial stability objectives. The balance to be struck is between a greater awareness and understanding of what is actually happening in the financial system, and a reflex reaction towards direct regulation and supervision.

For more ICFR analysis relating to shadow banking, you can view our 4-page Regulatory Briefing on  Shadow Banking by clicking here, or  click here to view our recent analysis, ‘Non-financial corporates: disintermediation and non-bank funding’.

Getting a grip on shadow banking requires familiarity with a broad range of issues and perspective. In this shadow banking ‘resource centre’, we have collected together a range of policy documents, significant speeches, and research papers. We have grouped these 40 papers according to the different perspectives they represent, as follows:

International Developments – The FSB’s Task Force on Shadow Banking
This section covers the FSB’s consultation and subsequent conclusions, as well as recent progress on various of the five ‘workstreams’ the Task Force prioritised, dealing with repo and money market funds. Click here to view  

European Developments – The European Commission Consults
This section covers the European Commission’s recent Green Paper, consulting on possible regulatory measures, and views from the ECB. Click here to view

Policy Makers Give Their Views – Significant Speeches
Here we look at significant speeches from policy makers such as Adair Turner, co-chair of the FSB’s Task Force on Shadow Banking, views from the Federal Reserve, the Bank of England, and the ECB. Click here to view

Industry Grapples With the Regulatory Approach
This section highlights a number of papers showing how industry is responding to the evolving shadow banking debate, with papers from McKinsey, Clifford Chance, and industry groups such as AIMA and ICMA. Click here to view

The Economics Profession Attempts to Tackle Complexity
This section looks at developing frameworks for analysing the financial system, particularly the non-bank financial sector and its interconnects with the rest of the system. There are a series of papers from economists at the Federal Reserve Bank of New York, as well as the Bank of England and the IMF. Click here to view

Public Officials Try to Place Shadow Banking and the Crisis
The Financial Crisis Inquiry Commission attempted to place the shadow banking system in the complex background of the financial crisis. This section contains testimony from senior industry figures, as well as the FCIC’s final report.
  Click here to view

Other Notable Papers
This section contains a number of other interesting papers, covering topics as diverse as the legal origins of shadow banking,  other academic papers, and work from think-tanks.  Click here to view

 

ICFR Regulatory Briefing on Shadow Banking  




 

Further ICFR Resources on Shadow Banking  

 Click here to download