Mapping exposures of EU banks to the global shadow banking system

Abad, Jorge; D’Errico, Marco; Killeen, Neill; Luz, Vera; Peltonen, Tuomas A.; Portes, Richard; Urbano, Teresa

doi:10.1016/j.jbankfin.2021.106168

Cited by 14 publications

(3 citation statements)

References 44 publications

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“…Typically, the abrupt liquidity shortage stemming from shadow banking can potentially trigger severe bank runs and widespread bank failures. Furthermore, the extensively overlapping nature of shadow banking operations exposes significant risks, amplifying systemic vulnerabilities and impeding sustainable development [3,19,45].…”

Section: Shadow Bankingmentioning

confidence: 99%

“…Despite numerous studies on regulatory arbitrage, credit intermediation, risk-taking, and the negative economic and environmental consequences of shadow banking in emerging markets, there remains a relative dearth of information on systemic risks associated with shadow banking in China [18,19]. China provides an ideal setting for investigating the systemic risk of shadow banking, given its government-dominated structure and frequent policy changes in the financial system, particularly within the banking sector (e.g., robust interest rate regulations by the central bank), which facilitates the examination of the correlation between commercial banks and shadow banks [20].…”

Section: Introductionmentioning

confidence: 99%

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Systemic Risk Arising from Shadow Banking and Sustainable Development: A Study of Wealth Management Products in China

Pan,

Fan

2024

Sustainability

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Shadow banking is a main way for the financial market to serve the real economy today, and this process is closely related to systemic risk. This study examines the impact of shadow banking associated with sustainable development in China’s banking on systemic risk. We analyze the data obtained from a rich sample of 31 listed commercial banks in China and shadow banking represented by wealth management products (WMPs) by constructing a dynamic complex interbank network model. The results show that the risks and vulnerabilities generated by shadow banking spread out through the interbank network and cause systemic risk to increase. The effect operates through increasing the number of default banks, reducing banks’ survival rate and profit, and forcing central bank bailout funds expansion. However, it has a positive impact in terms of augmenting liquidity and enhancing investment opportunities. Furthermore, the variability in the influence of different categories of shadow banking is assessed, emphasizing that short-term shadow banking exerts a more pronounced impact on systemic risk. In addition, the heterogeneity of the shadow banking effect on different types of commercial banks is explored, revealing that local and rural commercial banks experience a more conspicuous effect compared to state-owned and joint-stock banks. Our findings highlight that improving external supervision, promoting financial internal governance, and constraining credit linkages are vital for alleviating the increase in risks in shadow banking and maintaining the sustainable development of banking.

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Section: Shadow Bankingmentioning

confidence: 99%

Section: Introductionmentioning

confidence: 99%

Systemic Risk Arising from Shadow Banking and Sustainable Development: A Study of Wealth Management Products in China

Pan,

Fan

2024

Sustainability

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“…The authors propose a number of measures to minimize the risk of shadow banking activities, including introducing reporting requirements, improving transparency, and strengthening regulation and supervision. In this context, a paper from Abad et al (2022) provides additional interesting insights on the exposures of EU banks to the global shadow banking system. The authors use network analysis to analyze the linkages between banks and shadow banks.…”

Section: Literature Reviewmentioning

confidence: 99%

Direct Lending Shadow Banking Risk: Consequences of Commercial Banks Retreatment from European Middle Market

Hütteroth

2023

Eur. j., econ.

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The regional bank consolidation in the 1990 and the global financial crisis 2008-2009 reshaped the global credit market broadly. This paper analyzes potential direct lending risks based on the commercial banks retreatment from the European middle market loan segment. Fundamental characteristics of the private debt market development, like the intensified competition for deals, yield compression and deterioration of creditor protections and the potential shadow banking risks are analyzed. Furthermore, the lack of market information, delayed valuations and varying investment volumes are discussed in the context of challenging monitoring. In the conclusion the paper explains the importance for the European regulators to prepare for a drawdown of the private debt market, via three lines of defense to take care of the underwriting process, monitoring loans and restructuring expertise. Finally, the paper recommends conducting research on the European private debt deal structure and underlying investments for a regulatory monitoring.

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The cross-border interconnectedness of shadow banking

Özgür

2023

Economic Modelling

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Mapping exposures of EU banks to the global shadow banking system

Cited by 14 publications

References 44 publications

Systemic Risk Arising from Shadow Banking and Sustainable Development: A Study of Wealth Management Products in China

Systemic Risk Arising from Shadow Banking and Sustainable Development: A Study of Wealth Management Products in China

Direct Lending Shadow Banking Risk: Consequences of Commercial Banks Retreatment from European Middle Market

The cross-border interconnectedness of shadow banking

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