Shadow Banking: Policy Challenges for Central Banks

Abstract

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Shadow banking and financial intermediation

“…Due to its role in the GFC, shadow banking remained at the center of debates on financial instability. Several studies highlighted the role of the originate and distribute (O&D) model in financial instability (Kregel, 2007;Wray, 2009;Moe, 2014;Nesvetailova & Palan, 2013); and how the shift from commercial to shadow banking intensified these instabilities (D'Arista, 2018;Nersisyan & Wray, 2010;Tokunaga & Epstein, 2018). Initially, McCulley (2009) pointed at the lack of regulation and oversight for the instability; but others emphasized the procyclical nature of securitization and secured lending to explain the financial instability in these markets (Adrian & Shin, 2010;D'Arista, 2018;Gabor, 2016;Mehrling, 2011;Sissoko, 2016).…”

The Impacts of China's Shadow Banking Credit Creation on the Effectiveness of Monetary Policy

“…The results show that loose monetary policy can promote shadow banking's rapid development, which will impact the achievement of monetary policy goals. Moe (2014) finds that the market sensitivity of securitized derivatives designed and issued by the shadow banking system during the credit creation process is relatively high. It makes the entire credit chain unstable and increases the central bank's restrictions on the shadow banking system's credit expansion.…”

High Quality Securitisation and EU Capital Markets Union Is it Possible?

“…In the aftermath of the GFC it became increasingly evident that the SBS and the regulated financial institutions were highly interlinked, mainly because large banks had become very active both as providers of collateral and as participants in the repo market (Moe 2015;Gabor 2013).…”