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shadow banking: a review of the literature

  • Tobias Adrian Author-Name: Adam B. Ashcraft

We provide an overview of the rapidly evolving literature on shadow credit intermediation. The shadow banking system consists of a web of specialised financial institutions that conduct credit, maturity, and liquidity transformation without direct, explicit access to public backstops. The lack of such access to sources of government liquidity and credit backstops makes shadow banks inherently fragile. Much of shadow banking activities is intertwined with the operations of core regulated institutions such as bank holding companies and insurance companies, thus creating a source of systemic risk for the financial system at large. We review fundamental reasons for the existence of shadow banking, explain the functioning of shadow banking institutions and activities, discuss why shadow banks need to be regulated, and review the impact of recent reform efforts on shadow banking credit intermediation.

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This chapter was published in: Steven N. Durlauf & Lawrence E. Blume (ed.) , , chapter 1, pages , 2012,4th quarter update.
This item is provided by Palgrave Macmillan in its series The New Palgrave Dictionary of Economics with number v:6:year:2012:doi:3890.
Handle: RePEc:pal:dofeco:v:6:year:2012:doi:3890
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  1. Gennaioli, Nicola & Shleifer, Andrei & Vishny, Robert W., 2013. "A Model of Shadow Banking," Scholarly Articles 11688792, Harvard University Department of Economics.
  2. Michael J. Fleming & Warren B. Hrung & Frank M. Keane, 2010. "Repo Market Effects of the Term Securities Lending Facility," American Economic Review, American Economic Association, vol. 100(2), pages 591-96, May.
  3. Patrick E. McCabe & Marco Cipriani & Michael Holscher & Antoine Martin, 2013. "The Minimum Balance at Risk: A Proposal to Mitigate the Systemic Risks Posed by Money Market Funds," Brookings Papers on Economic Activity, Economic Studies Program, The Brookings Institution, vol. 46(1 (Spring), pages 211-278.
  4. Tobias Adrian & Christopher R. Burke & James J. McAndrews, 2009. "The Federal Reserve's Primary Dealer Credit Facility," Current Issues in Economics and Finance, Federal Reserve Bank of New York, vol. 15(Aug).
  5. Markus K. Brunnermeier & Lasse Heje Pedersen, 2007. "Market Liquidity and Funding Liquidity," NBER Working Papers 12939, National Bureau of Economic Research, Inc.
  6. Tobias Adrian & Karin Kimbrough & Dina Marchioni, 2010. "The Federal Reserve's Commercial Paper Funding Facility," Staff Reports 423, Federal Reserve Bank of New York.
  7. Mathis, Jérôme & McAndrews, James & Rochet, Jean-Charles, 2009. "Rating the raters: Are reputation concerns powerful enough to discipline rating agencies?," Journal of Monetary Economics, Elsevier, vol. 56(5), pages 657-674, July.
  8. Matthew Jaremski, 2010. "Free Bank Failures: Risky Bonds versus Undiversified Portfolios," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 42(8), pages 1565-1587, December.
  9. Bengt Holmstrom & Jean Tirole, 1998. "Private and Public Supply of Liquidity," Journal of Political Economy, University of Chicago Press, vol. 106(1), pages 1-40, February.
  10. Adam Copeland & Antoine Martin & Michael Walker, 2011. "Repo runs: evidence from the tri-party repo market," Staff Reports 506, Federal Reserve Bank of New York.
  11. Acharya, Viral V. & Schnabl, Philipp & Suarez, Gustavo, 2013. "Securitization without risk transfer," Journal of Financial Economics, Elsevier, vol. 107(3), pages 515-536.
  12. Gary Gorton & Andrew Metrick, 2009. "Securitized Banking and the Run on Repo," Yale School of Management Working Papers amz2358, Yale School of Management, revised 01 Sep 2009.
  13. Tobias Adrian & Hyun Song Shin, 2009. "The shadow banking system: implications for financial regulation," Staff Reports 382, Federal Reserve Bank of New York.
  14. Tobias Adrian & Emanuel Moench & Hyun Song Shin, 2010. "Financial intermediation, asset prices, and macroeconomic dynamics," Staff Reports 422, Federal Reserve Bank of New York.
  15. Tobias Adrian & Nina Boyarchenko, 2012. "Intermediary leverage cycles and financial stability," Staff Reports 567, Federal Reserve Bank of New York.
  16. Tobias Adrian & Adam B. Ashcraft, 2012. "Shadow banking regulation," Staff Reports 559, Federal Reserve Bank of New York.
  17. Raghuram G. Rajan, 2005. "Has Financial Development Made the World Riskier?," NBER Working Papers 11728, National Bureau of Economic Research, Inc.
  18. Olivier Armantier & Sandra Krieger & James McAndrews, 2008. "The Federal Reserve's Term Auction Facility," Current Issues in Economics and Finance, Federal Reserve Bank of New York, vol. 14(Jul).
  19. Gorton, Gary, 1985. "Clearinghouses and the Origin of Central Banking in the United States," The Journal of Economic History, Cambridge University Press, vol. 45(02), pages 277-283, June.
  20. Martin, Antoine & Skeie, David & Thadden, Ernst-Ludwig von, 2013. "Repo Runs," Discussion Paper Series of SFB/TR 15 Governance and the Efficiency of Economic Systems 448, Free University of Berlin, Humboldt University of Berlin, University of Bonn, University of Mannheim, University of Munich.
    • Antoine Martin & David Skeie & Ernst-Ludwig von Thadden, 2010. "Repo runs," Staff Reports 444, Federal Reserve Bank of New York.
    • Antoine Martin & David Skeie & Ernst-Ludig von Thadden, 2011. "Repo Runs," FMG Discussion Papers dp687, Financial Markets Group.
    • Martin, A. & Skeie, D. & von Thadden, E.L., 2010. "Repo Runs," Discussion Paper 2010-44S, Tilburg University, Center for Economic Research.
  21. Wayne Passmore & Shane M. Sherlund & Gillian Burgess, 2005. "The effect of housing government-sponsored enterprises on mortgage rates," Finance and Economics Discussion Series 2005-06, Board of Governors of the Federal Reserve System (U.S.).
  22. Benjamin J. Keys & Tanmoy Mukherjee & Amit Seru & Vikrant Vig, 2010. "Did Securitization Lead to Lax Screening? Evidence from Subprime Loans," The Quarterly Journal of Economics, MIT Press, vol. 125(1), pages 307-362, February.
  23. Lawrence White & W. Scott Frame, 2004. "Fussing and Fuming over Fannie and Freddie: How Much Smoke, How Much Fire?," Working Papers 04-27, New York University, Leonard N. Stern School of Business, Department of Economics.
  24. Tobias Adrian & Michael J. Fleming, 2005. "What financing data reveal about dealer leverage," Current Issues in Economics and Finance, Federal Reserve Bank of New York, vol. 11(Mar).
  25. Vitaly M. Bord & João A. C. Santos, 2012. "The rise of the originate-to-distribute model and the role of banks in financial intermediation," Economic Policy Review, Federal Reserve Bank of New York, issue Jul, pages 1-14.
  26. Tobias Adrian & Brian Begalle & Adam Copeland & Antoine Martin, 2013. "Repo and Securities Lending," NBER Chapters, in: Risk Topography: Systemic Risk and Macro Modeling, pages 131-148 National Bureau of Economic Research, Inc.
  27. Zoltan Pozsar & Tobias Adrian & Adam Ashcraft & Hayley Boesky, 2010. "Shadow banking," Staff Reports 458, Federal Reserve Bank of New York.
  28. Tobias Adrian & Hyun Song Shin, 2008. "Liquidity and leverage," Staff Reports 328, Federal Reserve Bank of New York.
  29. John Geanakoplos & Ana Fostel, 2008. "Leverage Cycles and the Anxious Economy," American Economic Review, American Economic Association, vol. 98(4), pages 1211-44, September.
  30. Tyler Wiggers & Adam B. Ashcraft, 2012. "Defaults and losses on commercial real estate bonds during the Great Depression era," Staff Reports 544, Federal Reserve Bank of New York.
  31. Merton, Robert C. & Bodie, Zvi, 1993. "Deposit insurance reform: a functional approach," Carnegie-Rochester Conference Series on Public Policy, Elsevier, vol. 38(1), pages 1-34, June.
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