TEXT-S&P: U.S. shadow banking supervisory framework is emerging | Reuters - 2 views
-
Shadow banking encompasses a wide variety and complex set of financial entities and products that may still present an important systemic risk, but it hasn't yet filled the void traditional banking has left
-
The term "shadow banking" first became prevalent in the aftermath of the financial crisis, and it lacks a universally consistent definition.
-
Shadow banking encompasses not only special-purpose vehicles that are beyond the Federal Reserve's supervision
- ...9 more annotations...
-
However, the term can oversimplify investment vehicles and products that are complex and interact very differently with the formal banking system.
-
The first is to what extent shadow banking might replace traditional banking in the U.S. financial sector.
-
The second question is whether banking regulators will effectively and quickly implement a supervisory framework that can contain systemic risk by eliminating regulatory arbitrage and providing greater transparency.
-
Shadow banking mimics traditional banking, though it doesn't have the protection, implicit or explicit, of a government guarantee that is available to depository institutions.
-
regulators are attempting to establish better oversight over the shadow banking sector to lower the possibility of future interventions, to reduce contagion to the formal banking sector, and to eliminate reliance on government support,
-
In fact, many of the proposed regulatory reforms aim to increase investors' risk sensitivity and better align incentives among investors, originators, and intermediaries."
-
Shadow banking is explained in this article and it is put into question whether shadow banking has the ability to replace the traditional banking system. The question of regulations regarding shadow banking is also asked and whether such regulations can be quickly and efficiently implemented. Shadow banking mimics traditional banking but it lacks the protection of a government guarantee that is available to depository institutions.