The shadow banking system or non bank financial system played a critical role in the recent financial crisis shadow banks are financial entities that borrow short term and lend long term but unlike traditional banks they are outside the purview of traditional banking regulation and do not have access to a lender of last resort or federal deposit insurance. The shadow banking system has been implicated as significantly contributing to the global financial crisis of 2007 2012 in a june 2008 speech us treasury secretary timothy geithner then president and ceo of the new york federal reserve bank placed significant blame for the freezing of credit markets on a run on the entities in the shadow banking system by their counterparties. June 12 2012 shadow banking after the financial crisis governor daniel k tarullo at the federal reserve bank of san francisco conference on challenges in global finance the role of asia san francisco california. This article examines the role of the shadow banking system in the global financial crisis of 2007 9 in order to do this one must first explain the reasons for the explosive growth of shadow banking in the immediate pre crisis era current explanations for this growth tend to hold two contrasting sector notably regulatory arbitrage and financial innovation the other emphasising . Shadow banking increases the risk of another global financial crisis september 14 2016 416pm edt just like the characters of the big short its time to pick up the warning signs of a global
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