Chasing the Shadows : How Significant is Shadow Banking in Emerging Markets?
Broadly defined as credit intermediation involving entities and activities outside the regular banking system, shadow banking raises important policy concerns. Given significant challenges with data availability, the size, nature and significance o...
| Main Authors: | , , |
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| Format: | Brief |
| Language: | English en_US |
| Published: |
World Bank, Washington, DC
2014
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| Subjects: | |
| Online Access: | http://documents.worldbank.org/curated/en/2012/09/16728825/chasing-shadows-significant-shadow-banking-emerging-markets http://hdl.handle.net/10986/17088 |
| Summary: | Broadly defined as credit intermediation
involving entities and activities outside the regular
banking system, shadow banking raises important policy
concerns. Given significant challenges with data
availability, the size, nature and significance of shadow
banking in emerging market and developing economies (EMDEs)
are even less discussed and understood. Shadow banking in
EMDEs generally does not involve long, complex, opaque
chains of intermediation, as is often the case in advanced
economies. Nonetheless, it can pose systemic risks, both
directly, as its importance in the total financial system
grows (with the concomitant credit, market, and liquidity
risks that its participants undertake), and indirectly
through its interconnectedness with the regulated banking
system. At the same time, shadow banks also play an
important role in channeling alternative funding sources to
EMDEs, especially as deleveraging pressures from European
banks continue. This suggests that policy makers need to
manage trade-offs carefully to ensure that shadow banks
provide alternative but safe sources of funding to the
private sector without generating additional systemic risks.
Based on a snapshot of selected EMDEs in East Asia and in
Central and Eastern Europe, and subject to caveats dictated
by limited data availability, the shadow banking system is
relatively small in most EMDEs, but has grown markedly in
recent years, reaching a not insignificant share of the
financial system in some countries, while remaining largely unregulated. |
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