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Shadow Banking: A Review of the Literature

Tobias Adrian

International Monetary Fund

Adam B. Ashcraft

Federal Reserve Bank of New York

October 1, 2012

FRB of New York Staff Report No. 580

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.

Number of Pages in PDF File: 38

Keywords: shadow banking, financial stability, financial intermediation

JEL Classification: E44, G00, G01, G28

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Date posted: November 13, 2012  

Suggested Citation

Adrian, Tobias and Ashcraft, Adam B., Shadow Banking: A Review of the Literature (October 1, 2012). FRB of New York Staff Report No. 580. Available at SSRN: https://ssrn.com/abstract=2175144 or http://dx.doi.org/10.2139/ssrn.2175144

Contact Information

Tobias Adrian (Contact Author)
International Monetary Fund ( email )
700 19th Street, N.W.
Washington, DC 20431
United States
HOME PAGE: http://www.tobiasadrian.com
Adam B. Ashcraft
Federal Reserve Bank of New York ( email )
33 Liberty Street
New York, NY 10045-0001
United States
212-720-1617 (Phone)
212-720-8363 (Fax)
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