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Thinking About 'Shadow Banking'

7 Pages Posted: 20 May 2015 Last revised: 9 May 2016

Richard Christopher Whalen

Economic Advisory Committee of FINRA; Indiana State University - Networks Financial Institute; Association of Private Enterprise Education (APEE); National Association of Business Economists (NABE)

Date Written: May 19, 2015

Abstract

The discussion around the role of nonbanks and their impact on financial stability is a healthy development. However, the author believes the current debate is filled with a number of misconceptions and omissions that detract from the goals of enhancing market stability and economic growth called for in the Dodd Frank Act. Moreover, the lack of a consistent market framework that is publicly articulated by regulators limits the ability of investors and consumers to better understand the risks in nonbank business models. Regulators in the U.S. and other nations have been focused on the growth of nonbanks as an area of future risk. Regulators and investors need to be more careful in parsing the risks posed by different categories of nonbank entities. Investors, regulators and policy makers need to be more aware of the different types of business models in the nonbank universe and the types of risks they pose, and fashion public policy accordingly.

Keywords: Banks, nonbanks, shadow banking, leverage, fraud, off-balance sheet, fiduciary, systemic risk

JEL Classification: G1, G2, G18, N2, N22

Suggested Citation

Whalen, Richard Christopher, Thinking About 'Shadow Banking' (May 19, 2015). Available at SSRN: https://ssrn.com/abstract=2608143 or http://dx.doi.org/10.2139/ssrn.2608143

Richard Christopher Whalen (Contact Author)

Economic Advisory Committee of FINRA ( email )

1735 K Street NW
Washington, DC 20006
United States

HOME PAGE: http://tinyurl.com/2bne6p

Indiana State University - Networks Financial Institute ( email )

Terre Haute, IN 47809
United States

HOME PAGE: http://tinyurl.com/4ckcoxo

Association of Private Enterprise Education (APEE) ( email )

313 Fletcher Hall, Dept. 6106
615 McCallie Avenue
Chattanooga, TN 37403-2598
United States

HOME PAGE: http://https://www.apee.org/

National Association of Business Economists (NABE) ( email )

1920 L St. NW, Suite 300
Washington, DC 20036
United States

HOME PAGE: http://www.nabe.com

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