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Shadow banking regulation

Author Info

  • Tobias Adrian
  • Adam B. Ashcraft

Abstract

Shadow banks conduct credit intermediation without direct, explicit access to public sources of liquidity and credit guarantees. Shadow banks contributed to the credit boom in the early 2000s and collapsed during the financial crisis of 2007-09. We review the rapidly growing literature on shadow banking and provide a conceptual framework for its regulation. Since the financial crisis, regulatory reform efforts have aimed at strengthening the stability of the shadow banking system. We review the implications of these reform efforts for shadow funding sources including asset-backed commercial paper, triparty repurchase agreements, money market mutual funds, and securitization. Despite significant efforts by lawmakers, regulators, and accountants, we find that progress in achieving a more stable shadow banking system has been uneven.

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Paper provided by Federal Reserve Bank of New York in its series Staff Reports with number 559.

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Date of creation: 2012
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Handle: RePEc:fip:fednsr:559
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Keywords: Intermediation (Finance) ; Banks and banking - Regulations ; Financial market regulatory reform ; Credit;

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Find related papers by JEL classification:
  • G28 - Financial Economics - - Financial Institutions and Services - - - Government Policy and Regulation
  • G20 - Financial Economics - - Financial Institutions and Services - - - General
  • G24 - Financial Economics - - Financial Institutions and Services - - - Investment Banking; Venture Capital; Brokerage
  • G01 - Financial Economics - - General - - - Financial Crises

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  1. Tobias Adrian & Emanuel Moench & Hyun Song Shin, 2010. "Macro risk premium and intermediary balance sheet quantities," Staff Reports 428, Federal Reserve Bank of New York.
  2. Nicola Gennaioli, 2012. "A Model of Shadow Banking," 2012 Meeting Papers 89, Society for Economic Dynamics.
  3. 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.
  4. 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.
  5. Raghuram G. Rajan, 2005. "Has financial development made the world riskier?," Proceedings - Economic Policy Symposium - Jackson Hole, Federal Reserve Bank of Kansas City, issue Aug, pages 313-369.
  6. Carlos O. Arteta & Mark S. Carey & Ricardo Correa & Jason Kotter, 2008. "Which banks sponsored ABCP vehicles and why?," Proceedings 1072, Federal Reserve Bank of Chicago.
  7. 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).
  8. Acharya, Viral V. & Schnabl, Philipp & Suarez, Gustavo, 2013. "Securitization without risk transfer," Journal of Financial Economics, Elsevier, vol. 107(3), pages 515-536.
  9. Adam Ashcraft & Paul Goldsmith-Pinkham & Peter Hull & James Vickery, 2011. "Credit Ratings and Security Prices in the Subprime MBS Market," American Economic Review, American Economic Association, vol. 101(3), pages 115-19, May.
  10. 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, Oxford University Press, vol. 125(1), pages 307-362.
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Cited by:

  1. Giampaolo Gabbi & Elisa Ticci, 2014. "Implications of financialisation for sustainability," Working papers wpaper47, Financialisation, Economy, Society & Sustainable Development (FESSUD) Project.
  2. Rui Gong & Frank Page, 2016. "Shadow banks and systemic risks," LSE Research Online Documents on Economics 66044, London School of Economics and Political Science, LSE Library.
  3. Tobias Adrian & Adam B. Ashcraft, 2012. "Shadow banking: a review of the literature," Staff Reports 580, Federal Reserve Bank of New York.
  4. Tobias Adrian & Daniel M. Covitz & J. Nellie Liang, 2013. "Financial stability monitoring," Staff Reports 601, Federal Reserve Bank of New York.
  5. Patricia C. Mosser & Joseph Tracy & Joshua Wright, 2013. "The capital structure and governance of a mortgage securitization utility," Staff Reports 644, Federal Reserve Bank of New York.
  6. Krug, Sebastian & Wohltmann, Hans-Werner, 2016. "Shadow banking, financial regulation and animal spirits: An ACE approach," Economics Working Papers 2016-08, Christian-Albrechts-University of Kiel, Department of Economics.
  7. Ingmar Schumacher, 2012. "On the Self-Fulfilling Prophecy of Changes in Sovereign Ratings," Working Papers hal-00668284, HAL.
  8. Ingmar Schumacher, 2014. "On the Self," Working Papers 2014-51, Department of Research, Ipag Business School.
  9. Milcheva, Stanimira, 2013. "Cross-country effects of regulatory capital arbitrage," Journal of Banking & Finance, Elsevier, vol. 37(12), pages 5329-5345.
  10. Havran, Dániel & Erb, Tamás, 2015. "Mit veszítünk a piaci súrlódásokkal?. A pénzügyi piacok mikrostruktúrája
    [Trading mechanisms and market frictions. Microstructure of the financial markets]    ," Közgazdasági Szemle (Economic Review - monthly of the Hungarian Academy of Sciences), Közgazdasági Szemle Alapítvány (Economic Review Foundation), vol. 0(3), pages 229-262.
  11. Martin Kuncl, 2015. "Securitization under Asymmetric Information over the Business Cycle," Staff Working Papers 15-9, Bank of Canada.
  12. Sermin Gungor & Jesus Sierra, 2014. "Search-for-Yield in Canadian Fixed-Income Mutual Funds and Monetary Policy," Staff Working Papers 14-3, Bank of Canada.
  13. repec:ipg:wpaper:2014-051 is not listed on IDEAS
  14. Grochulski, Borys & Zhang, Yuzhe, 2015. "Optimal Liquidity Regulation With Shadow Banking," Working Paper 15-12, Federal Reserve Bank of Richmond, revised 15 Oct 2015.
  15. Gary B. Gorton & Andrew Metrick, 2012. "Who Ran on Repo?," NBER Working Papers 18455, National Bureau of Economic Research, Inc.

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