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Shadow banking: a review of the literature

  • Tobias Adrian
  • 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 specialized 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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Paper provided by Federal Reserve Bank of New York in its series Staff Reports with number 580.

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Date of creation: 2012
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Handle: RePEc:fip:fednsr:580
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  1. 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.).
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  6. Tobias Adrian & Adam B. Ashcraft, 2012. "Shadow Banking Regulation," Annual Review of Financial Economics, Annual Reviews, vol. 4(1), pages 99-140, October.
  7. Patrick E. McCabe & Marco Cipriani & Michael Holscher & Antoine Martin, 2012. "The minimum balance at risk: a proposal to mitigate the systemic risks posed by money market funds," Finance and Economics Discussion Series 2012-47, Board of Governors of the Federal Reserve System (U.S.).
  8. Zoltan Pozsar & Tobias Adrian & Adam B. Ashcraft & Hayley Boesky, 2010. "Shadow banking," Staff Reports 458, Federal Reserve Bank of New York.
  9. Holmstrom, B & Tirole, J, 1996. "Private and Public Supply of Liquidity," Working papers 96-21, Massachusetts Institute of Technology (MIT), Department of Economics.
  10. Gary B. Gorton & Andrew Metrick, 2009. "Securitized Banking and the Run on Repo," NBER Working Papers 15223, National Bureau of Economic Research, Inc.
  11. Tobias Adrian & Hyun Song Shin, 2008. "Liquidity and leverage," Staff Reports 328, Federal Reserve Bank of New York.
  12. Tobias Adrian & Karin Kimbrough & Dina Marchioni, 2010. "The Federal Reserve's Commercial Paper Funding Facility," Staff Reports 423, Federal Reserve Bank of New York.
  13. Mandel, Benjamin H. & Morgan, Donald P. & Wei, Chenyang, 2012. "The Role of bank credit enhancements in securitization," Economic Policy Review, Federal Reserve Bank of New York, issue 07, pages 35-46.
  14. Nicola Gennaioli & Andrei Shleifer & Robert Vishny, 2012. "A Model of Shadow Banking," Working Papers 576, Barcelona Graduate School of Economics.
  15. Bord, Vitaly M. & Santos, João A. C., 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 21-34.
  16. Copeland, Adam & Martin, Antoine & Walker, Michael, 2011. "Repo runs: evidence from the tri-party repo market," Staff Reports 506, Federal Reserve Bank of New York, revised 01 Aug 2014.
  17. 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.
  18. Tobias Adrian & Brian Begalle & Adam Copeland & Antoine Martin, 2012. "Repo and securities lending," Staff Reports 529, Federal Reserve Bank of New York.
    • 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.
  19. Markus K. Brunnermeier & Lasse Heje Pedersen, 2009. "Market Liquidity and Funding Liquidity," Review of Financial Studies, Society for Financial Studies, vol. 22(6), pages 2201-2238, June.
  20. 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.
  21. Tobias Adrian & Hyun Song Shin, 2009. "The shadow banking system: implications for financial regulation," Staff Reports 382, Federal Reserve Bank of New York.
  22. Antoine Martin & David R. Skeie & Ernst-Ludwig Von Thadden, 2010. "Repo runs," Staff Reports 444, Federal Reserve Bank of New York.
  23. Tobias Adrian & Nina Boyarchenko, 2012. "Intermediary Leverage Cycles and Financial Stability," Working Papers 2012-010, Becker Friedman Institute for Research In Economics.
  24. John Geanakoplos & Ana Fostel, 2008. "Leverage Cycles and the Anxious Economy," American Economic Review, American Economic Association, vol. 98(4), pages 1211-44, September.
  25. Acharya, Viral V & Schnabl, Philipp & Suarez, Gustavo, 2012. "Securitization Without Risk Transfer," CEPR Discussion Papers 8769, C.E.P.R. Discussion Papers.
  26. 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.
  27. 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.
  28. 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.
  29. Olivier Armantier & Sandra C. Krieger & James J. McAndrews, 2008. "The Federal Reserve's Term Auction Facility," Current Issues in Economics and Finance, Federal Reserve Bank of New York, vol. 14(Jul).
  30. 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).
  31. 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).
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