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The Nonbank-Bank Nexus and the Shadow Banking System

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  • Manmohan Singh
  • Zoltan Pozsar
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    Abstract

    The present way of thinking about financial intermediation does not fully incorporate the rise of asset managers as a major source of funding for banks through the shadow banking system. Asset managers are dominant sources of demand for non-M2 types of money and serve as source collateral ?mines'' for the shadow banking system. Banks receive funding through the re-use of pledged collateral ?mined'' from asset managers. Accounting for this, the size of the shadow banking system in the U.S. may be up to $25 trillion at year-end 2007 and $18 trillion at year-end 2010, higher than earlier estimates. In terms of policy, regulators will need to consider the re-use of pledged collateral when defining bank leverage ratios. Also, given asset managers'' demand for non-M2 types of money, monitoring the shadow banking system will warrant closer attention well beyond the regulatory perimeter.

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    Bibliographic Info

    Paper provided by International Monetary Fund in its series IMF Working Papers with number 11/289.

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    Length: 19
    Date of creation: 01 Dec 2011
    Date of revision:
    Handle: RePEc:imf:imfwpa:11/289

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    Related research

    Keywords: Asset management; Banking systems; Financial intermediation; Nonbank financial sector; collateral; banking; banking system; banking sector; holding company; bank funding; bank claims; foreign exchange; off balance sheet; bank holding; banking community; bank holding company; capital adequacy; accounting framework; banking statistics; bank exposures; bank credit; bank financing; bank asset;

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    1. Arvind Krishnamurthy & Annette Vissing-Jorgensen, 2007. "The Demand for Treasury Debt," NBER Working Papers 12881, National Bureau of Economic Research, Inc.
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    Cited by:
    1. Menno Broos & Krit Carlier & Jan Kakes & Eric Klaaijsen, 2012. "Shadow Banking: An Exploratory Study for the Netherlands," DNB Occasional Studies, Netherlands Central Bank, Research Department 1005, Netherlands Central Bank, Research Department.

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