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A Principle for Forward-Looking Monitoring of Financial Intermediation: Follow the Banks!

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Abstract

In the previous posts in this series on the evolution of banks and financial intermediaries, my colleagues and I considered the extent to which banks still play a central role in financial intermediation, given the rise of the shadow banking system. There’s no arguing that financial intermediation has grown in complexity. And there’s also little doubt that the balance sheet of banks is not as representative of financial intermediation activity, and the associated risks, as it once was. Yet as we’ve argued, regulated bank entities have remained very much involved in virtually every aspect of modern financial intermediation, either directly or indirectly providing support to other entities that themselves operate more in the regulatory shadow. I suggest in this post that the insights from the series can be relevant to the design of modern regulation as well.

Suggested Citation

  • Nicola Cetorelli, 2012. "A Principle for Forward-Looking Monitoring of Financial Intermediation: Follow the Banks!," Liberty Street Economics 20120723b, Federal Reserve Bank of New York.
  • Handle: RePEc:fip:fednls:86821
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    Keywords

    Financial innovation; Bank evolution; Financial intermediation;
    All these keywords.

    JEL classification:

    • G2 - Financial Economics - - Financial Institutions and Services

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