Basel III G: Shadow Banking and Project Finance

Yale Program on Financial Stability Case Study 2014-1G-V1

9 Pages Posted: 14 Mar 2015

See all articles by Christian McNamara

Christian McNamara

Yale University - Yale Program on Financial Stability

Andrew Metrick

Yale School of Management; National Bureau of Economic Research (NBER); Yale University - Yale Program on Financial Stability

Date Written: November 1, 2014

Abstract

The Net Stable Funding Ratio (NSFR), a liquidity standard introduced by Basel III, seeks to promote a better match between the liquidity of a bank’s assets and the manner in which the bank funds those assets. The NSFR requires banks to maintain a minimum amount of funding deemed “stable” by the Basel framework based on the liquidity of the banks’ assets and activities over a one-year timeframe. One of the areas seen as most affected by this development may be bank participation in project finance for infrastructure development. Since the global demand for infrastructure development remains robust, the shadow banking system may emerge as a significant source of project finance. This case considers whether the requirement that banks better match their assets and sources of funding is affecting bank business models and what it means for the availability of credit, and whether there are risks associated with the growing role of shadow banking in project finance.  

Keywords: Systemic Risk, Financial Crises, Financial Regulation

JEL Classification: G01, G28

Suggested Citation

McNamara, Christian and Metrick, Andrew, Basel III G: Shadow Banking and Project Finance (November 1, 2014). Yale Program on Financial Stability Case Study 2014-1G-V1. Available at SSRN: https://ssrn.com/abstract=2576973 or http://dx.doi.org/10.2139/ssrn.2576973

Christian McNamara

Yale University - Yale Program on Financial Stability ( email )

165 Whitney Avenue
P.O. Box 208200
New Haven, CT 06520-8200
United States

Andrew Metrick (Contact Author)

Yale School of Management ( email )

165 Whitney Avenue
New Haven, CT 06511
United States
(203)-432-3069 (Phone)

HOME PAGE: http://faculty.som.yale.edu/andrewmetrick/

National Bureau of Economic Research (NBER) ( email )

1050 Massachusetts Avenue
Cambridge, MA 02138
United States

Yale University - Yale Program on Financial Stability

165 Whitney Avenue
P.O. Box 208200
New Haven, CT 06520-8200
United States

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