The Governance of the Black Holes of the World Economy: Shadow Banking and Offshore Finance

CITYPERC Working Paper Series No. 2013/03

26 Pages Posted: 13 Feb 2013 Last revised: 18 Feb 2013

See all articles by Ronen Palan

Ronen Palan

City University London - International Political Economy

Anastasia Nesvetailova

City University London - City Political Economy Research Centre

Date Written: February 1, 2013

Abstract

This paper focuses on regulatory challenges posed by the two interconnected structures of the global financial system – the economy of tax havens (or offshore financial centres), and the shadow banking system. The financial crisis of 2007-09 has revealed that tax havens structures and shadow banking entities play a central role in the practise of financial institutions reliant on financial innovation. Thriving on complexity, opaque networks and driven by arbitrage, the two phenomena pose tremendous challenges to national and international regulators aiming to restore the financial cycle in the recessionary environment. In this paper, we analyse ‘the state of play’ and the current plans for the governance of tax havens, offshore finance and the shadow banking industry. We find that although offshore financial centres and shadow banking are outside the scope of academic economics, they have attracted a lot of attention on the part of financial researchers and regulators. Along with other macro-prudential and system risk concerns, the regulation, or governance of these ‘black holes’ of the global economy is increasingly assuming a central place on the agenda of financial regulators. In what follows, we explore the reasons behind this development.

Keywords: offshore financial centres, shadow banking, tax havens, financial regulation, governance, CITYPERC

JEL Classification: P16

Suggested Citation

Palan, Ronen and Nesvetailova, Anastasia, The Governance of the Black Holes of the World Economy: Shadow Banking and Offshore Finance (February 1, 2013). CITYPERC Working Paper Series No. 2013/03. Available at SSRN: https://ssrn.com/abstract=2216795 or http://dx.doi.org/10.2139/ssrn.2216795

Ronen Palan

City University London - International Political Economy ( email )

Northampton Square
London, EC1V 0HB
United Kingdom

Anastasia Nesvetailova (Contact Author)

City University London - City Political Economy Research Centre ( email )

London, EC1V 0HB
United Kingdom

Register to save articles to
your library

Register

Paper statistics

Downloads
439
Abstract Views
1,431
rank
64,240
PlumX Metrics