Shadow banking

The shadow banking system in Mainland China has experienced a rapid growth since the global financial crisis, surprisingly rebounding in the first quarter of this year, despite the many efforts by the central bank to curb off-balance activities. Since Chinese regulators discourage lending to certain industries, large state-controlled banks dominate the system (the state provides a great deal of direction to them), the limit of bank loans to deposit is constraining, the need for an alternative system of financing has arisen in China. Shadow banks, for instance, are not subject to bank limits on loan or deposit rates, avoid costly PBOC reserve requirements and, basically, allow many companies that cannot obtain financing through regular bank loans or bonds to obtain such financing. Does shadow banking imply a risk for the whole of the Chinese financial system? Is there a real need for shadow banking activities in China? How can the Chinese authorities curb shadow banking but, at the same time, meet the needs of all these companies that require financial services to be more widely available in China?

La crisi finanziaria deflagrata nel 2008 ha evidenziato il complesso livello di interrelazioni del mercato finanziario su scala mondiale e posto il problema di incrementarne la resilienza.  I fora tradizionalmente deputati a discutere sul futuro della regolamentazione ne hanno guidato il rinnovo focalizzandosi sull’obiettivo di spezzare il connubio tra azzardo morale e status di “immortalità” proprio delle istituzioni finanziarie di rilevanza sistemica. Dopo un decennio di riforme, gli standard-setter globali avvertono come vicina la meta «towards ending “too big to fail”», poiché lo «development of policies to help ensure that systemically important financial institutions (SIFIs) can be resolved without wider disruption if they fail is largely complete» (Financial stability board, 2017). Siamo dunque all’epilogo del “tbtf”?
A questa domanda prova a rispondere questo lavoro, muovendo anzitutto dall’iter seguito dai consessi internazionali per la definizione di un quadro giuridico applicabile alle istituzioni finanziarie di rilevanza sistemica, e in particolare alle banche globali, sul piano della c.d. soft law. Lo studio continua con la ricerca dei punti di contatto, del senso delle direttrici d’azione e delle influenze reciproche, con il coevo processo di rinnovamento dell’ordinamento bancario dell’Unione europea, presa a modello come una sorta di cartina di tornasole sul grado di recepimento delle riforme internazionali. Prosegue poi con un approfondimento del dato fenomenologico, teso anche a valutare le possibili ripercussioni degli accresciuti presidi regolamentari sulle scelte degli intermediari.
Dall’analisi svolta emergerà, da un lato, il rafforzamento del governo sull’economia globalizzata e la sua influenza riguardo alla realizzazione di storiche trasformazioni in sede europea, ma anche, dall’altro lato, la difficoltà per la riforma di andare oltre la propria ombra. Il parallelo tra l’essere e il dover essere mostrerà infatti criticità sul piano degli obiettivi (presunzione di bloccare l’impatto sistemico delle crisi), degli strumenti a disposizione della autorità nazionali/transnazionali di vigilanza (lacunosi o di complicata attuazione) e della portata dell’intervento regolatorio su aspetti cruciali, quali ad esempio l’interconnessione, la finanza marked-based ed i modelli d’intermediazione.

La banca en la sombra es un concepto cada vez más utilizado en la literatura financiera, especialmente tras su inminente papel como uno de los detonantes de la crisis de 2007-2008. Cabe entonces preguntarnos qué es, de dónde vino y si es realmente ficticia.

What is shadow banking and what is political about it? To address these
questions, the paper first unpacks the mechanics of shadow banking and
compares them to traditional banking. Based on this stylized explanation, it
problematizes the use of the term ‘banking’. Indeed, shadow banks turn longterm liabilities into short-term financial instruments, effectively turning
traditional banking on its head. Next, it draws on three political science
frameworks to bring to the fore and develop the political content of
mainstream economic expertise on shadow banks. First, it shows that shadow banks played a significant role in the rent-seeking behavior of the financial sector by extracting regulatory rents and subsidies. Second, in spite of this, the extension of public backstops to shadow banks has largely been treated as logical institutional adaptation to a changing financial landscape. Third, shadow banking emerged alongside and contributed to growing economic inequality. It did so by acting as a credit bridge between giant pools of money seeking returns and a growing number of borrowers, raising further questions about its economic and social utility. These findings contribute to the emerging political economy literature on shadow banking, expert ideas and the relationship between finance and larger societal developments.

At the beginning of the financial crisis, attempts were made to counteract its effects in line with the rationale of market liberalism. However, after Lehman Brothers filed for bankruptcy, it became clear that the laissez-faire rationality no longer functioned as the financial market's governing mode. It was then that the Federal Reserve intervened directly in the market as shadow dealer of last resort. This form of intervention differs fundamentally from previous forms because the Fed itself came to act as trader and market maker. Following Foucault, I argue that since the financial crisis central banks have emerged as sovereign powers to set and guarantee the limits within which financial players can trade on financial markets. This intervention marks a significant change of the liberal dispositive, reflected in a redefinition of the state-market nexus. It does, however, not imply a back to the state rationale or a weakening of the financial markets. Instead, the entanglement between the state and financial markets moves towards a rationality which could be framed as post-laissez-faire. The rationality of the market liberal dispositif is flanked by the rationality of the sovereignty dispositif today to a much greater extent than it was before the financial crisis.

Cryptocurrencies such as Bitcoin, SETLcoin, Ether, Solar Coin, or Liberty Reserve exist since 2009. Because of their decentralized control, they are often considered a threat or alternative to the conventional centralized banking system. While the technological implication of some such currencies, especially of Bitcoin, has attracted much attention, so far there is little discussion about the entire field of cryptocurrencies and very little academic literature addressing its ethical significance. In this article, we thus address the impact of ‘‘blockchain technology’’ on the nature of financial transactions from a business ethics perspective. We begin with a survey on relevant literature from neighboring disciplines. Next, we work towards a 3 9 3 framework for current debates on the ethics of cryptocurrencies (see Table 1): we combine the micro, meso, and macro levels of business and society with assessments of the potential ethical impact of cryptocurrencies as morally beneficial, detrimental, and ambiguous. In addition, we highlight possible avenues for future research, such as the changing roles of the miners and regulators, the prosocial use of cryptocurrencies, the antisocial use for shadow banking and transactions in the ‘dark net’ and cryptocurrencies’ effect on inflation and deflation.

This article explores the effects of the political reactions to the 2007–2009 financial crisis on the monetary system. It chimes in with the view that shadow banks create ‘shadow money’, i.e. private substitutes for bank deposits. The article analyses how the three main forms of shadow money – money market fund shares, overnight repurchase agreements and asset-backed commercial papers – were affected by the short-term government intervention and medium-term regulation during and after the 2007–2009 financial crisis in the United States. The analysis reveals that the measures taken between 2007 and 2014 integrated some shadow money forms in the public money supply. In the year after the Lehman collapse, the initially private shadow money supply was either publicly backstopped or de-monetised as it had broken par to bank deposits. The public backstops took on the form of emergency facilities established by the Federal Reserve and guarantees proclaimed by the Treasury. Those backstops imply that the public institutional framework to protect bank deposits was extended to some forms of shadow money during the crisis. This tendency has continued in post-crisis regulation. Accordingly, the 2007–2009 financial crisis has triggered a paradigmatic change in the monetary system, attributable to the political decisions of US authorities.

In the years since the financial crisis, and for the first time in the history of central banks, the Federal Reserve has been pursuing monetary policies which allow shadow banks to access its reserves. The paper examines these policies in an analysis based on the concept of security structure. The aim is to facilitate a better understanding of complex public and private institutional arrangements which convert specific credit claims into money or enable them to approximate or simulate the money-form. As the financial crisis reached its peak in September 2008, the Federal Reserve was not able to contain the impact precisely because the security structure existing at the time between banks and the Fed did not extend to the shadow banking system, which had meanwhile become the backbone of the global financial system. To address this situation, the Fed initiated new security structures that were specifically designed to also give players in the shadow banking system access to liquidity and collateral. The concept ‘security structure' serves as an analytical tool to explore dynamic forms of safety and liquidity generation and to distinguish between credit expansion and money creation. It also helps to differentiate between three qualitatively different stages of security: central bank money, quasi-money and shadow money. In this way, it foregrounds the politics of money creation and the new role of the shadow banking system.

Comment l’identification de l’étendue, des dysfonctionnements et de l’intérêt du shadow banking doit-elle guider sa régulation ? En quoi la notion de risque, intrinsèque et systémique, constitue-t-elle le point central de compréhension et de circonscription de la définition de ces trois aspects ?

Taxation in general and tax evasion in particular are inherently geographical in nature but only a small number of geographers have focused on them. In this progress report I present geographers' research on offshore financial centres alongside the work of researchers from other disciplines to present an overview of what we know about the geographies of tax evasion and avoidance. It is argued that not only much regulatory work but also much research remains to be done on tax havens.
Keywords: offshore financial centre, taxation, tax avoidance, tax evasion, tax haven, economic geography, political geography

This article focuses on the role the shadow banking system played in the financial crisis of 2007–9. Engaging with emergent theories of shadow banking, I inquire into its structural role in contemporary capitalism. My main premise here is that the crisis of 2007–9 is distinct in financial history because it did not centre on
any organised market. Rather, it was crisis of the overcrowded financial channels bridging the present and the future, which have become congested because of the massive concentration of financial values generated, yet not sustained, through the
shadow banking network. My analysis suggests that shadow banking has determined  the nature of financial crisis of 2007–9 and continues to play a necessary role in financial capitalism based on futurity. Drawing on scholarship in financial Keynesianism, contemporary legal studies and early evolutionary political
economy, I argue that shadow banking is best seen as the organic institutional infrastructure of financialised capitalism based on debt and geared towards futurity, a concept originally developed by John Commons.

El artículo analiza la conexión entre la explosión del shadow banking y los mecanismos que le permiten desarrollarse, con especial atención a la regulación bancaria y más, en concreto, a la derogación de Glass-Steagal Act y su sustitución por Glamm-Leach-Bliley Act. El principal objetivo de este artículo será probar que el shadow banking se halla tan regulado como el resto del sistema bancario, además, se establece que si bien el nacimiento del shadow banking se da con anterioridad a la derogación de Glass-Steagal Act, su extensión se da al amparo de la nueva Glamm-Leach-Bliley Act que la sustituye, siendo el descalce de plazos y riesgo el verdadero problema.

We investigate the connections between bank capital regulation and the prevalence of lightly regulated nonbanks (shadow banks) in the U.S. corporate loan market. For identiffcation, we exploit a supervisory credit register of syndicated loans, loan-time
fixed-effects, and shocks to capital requirements arising from surprise features of the U.S. implementation of Basel III. We find that less-capitalized banks reduce loan retention, particularly among loans with higher capital requirements and at times when capital is scarce, and nonbanks step in. This reallocation has important spillovers: during the 2008 crisis, loans funded by nonbanks with fragile liabilities are less likely to be rolled over and experience greater price volatility.
Review of Financial Studies (2021), 34(5), 2181-2235.
DOI: https://doi.org/10.1093/rfs/hhaa106
This is an Open Access article distributed under the terms of the Creative Commons Attribution License (http://creativecommons.org/licenses/by/4.0/), which permits unrestricted reuse, distribution, and reproduction in any medium, provided the original work is properly cited.

While the origin of shadow banks may be traced to the 1970s, developing countries have witnessed a massive growth of shadow banks in more recent decades. India too has seen a similar growth in shadow banks; however, the recent 2018 collapse of IL&FS Group, a major shadow bank, disrupted the credit cycle, stalled investment and even affected overall GDP growth. With experts warning that shadow banks are susceptible to systemic risks and crisis, it becomes imperative to understand the shadow banking system better. In this paper, we use exploratory data analysis-both quantitative and qualitative-to draw attention to the need for definitional clarity in the concept of shadow banks and how they operate. Trends in Indian shadow banking are discussed using data drawn from secondary sources. Systemic risks in India's shadow banking sector are identified and policy interventions are discussed. The study is imperative for highlighting the importance of shadow banking in India, its growth and the evolving policy interventions regulating this important component of the financial system.

The ‘productivity’ of shadow banking marks the organizing power of finan- cial interaction via and beyond financial regulation. By analysing shadow banking as new monetary institutional form, this introduction contributes to the socio-political debate on financial regulation. Whereas contemporary dis- cussions regarding financial regulation often solely point to its efficacy, little attention is drawn on how the space off the regulatory provisions organise the financial field.
To clarify the present state of the debate, this introduction marks the limitations of research associated with International Political Economy. It dis- plays central origins for regulatory thinking along early debates concerning information and efficiency in Financial Economics; and it contrasts this or- thodoxy with the critical review by the French regulation school. To highlight the regulatory productivity of shadow banking, the article conceptualizes it as a new kind of monetary institutional form.
In conclusion, the introduction proposes a conception of financial regu- lation as itself a socio-political relation. This missing focus in the literature serves as the point of departure for the following socio-political perspectives on (shadow) banking.

El dinero mercancía, a diferencia del papel moneda, funciona como medida de valor ya que tiene un valor intrínseco al ser encarnación de trabajo abstracto. El papel moneda no tiene valor, solo refleja “idealmente” este trabajo que engendra valor —de aquí que pueda producirse capital ficticio—. Así, la primera parte de este artículo trata sobre aspectos como dinero endógeno, dinero crediticio y capital ficticio. La segunda parte consiste en el análisis de esa teorización en el capitalismo actual con una fuerte impronta de especulación, en lo cual el capital ficticio —en cualquiera de sus formas— es preponderante.

Merchandise money, unlike paper money, works as a measure of value since it has an intrinsic value that it is the embodiment of abstract work. Paper money has no value; it only “ideally” reflects this work that generates value —therefore fictitious capital can be produced—. Thus, the first part of this article is about aspects such as endogenous money, credit money, and fictitious capital. The second part consists of the analysis of that theorization in the current capitalism with a strong mark of speculation, in which the fictitious capital —in any of its forms— is preponderant.

It is a convention to say that the Eurozone architecture is ill-constructed and deficient. However, monetary architecture is not a well-defined term in monetary theory, and there is no consensus what the Eurozone architecture is beyond being a metaphor. By combining insights from the research strand of (critical) macro-finance, this GEGI Study develops a comprehensive definition of monetary architecture in general and presents an inductive, institutionalist model of the Eurozone architecture in particular.

The model portrays two monetary jurisdictions—the US and the Eurozone—which have a hierarchical relationship. Each monetary jurisdiction is subdivided into four segments of central banks, commercial banks, non-bank financial institutions and a ‘fiscal ecosystem’. Different institutions are located within these segments, represented as balance sheets. These have a hierarchical relationship with each other as well, and interlock through the instruments they hold as assets and liabilities. This adds up to a fully self-referential credit system. Each institution has its own respective elasticity space for balance sheet expansion that depends on available counterparties, stipulations for allowed on-balance-sheet activities and available contingent assets and liabilities which are provided by higher-ranking institutions and only become real once a crisis hits. A monetary architecture is thus defined a historically specific setup of segments, institutions, instruments and elasticity space within a monetary jurisdiction.

The model emphasizes the centrality of the TARGET2 system, shows how offshore US-Dollars are enmeshed in the Eurozone, and rejects the notion that a monetary architecture could ever be ‘finished’. It will serve as an starting point for future descriptive and policy-oriented research.

Small and medium enterprises (SMEs) represent the backbone of China’s economy, yet they lack access to bank credit. SMEs thus rely on a wide range of alternative sources, including informal finance, online peer-to-peer (P2P) platforms, registered non-banking financial institutions (NBFIs), and underground financiers. This paper distinguishes among different types of ‘shadow banking’ to clarify popular misconceptions about the nature of risks associated with informal financial intermediation in China. The evolution of SME finance in other contexts suggests that regulated and well-managed NBFCs provide an enduring
foundation for commercialised financial intermediation even in advanced industrialised economies.

Zentralbanken haben sich zu mächtigen Institutionen innerhalb der Staaten entwickelt. Als die COVID-19-Welle die Eurozone im März 2020 überrollte, nationale Regierungen verzweifelt die Grenzen schlossen und die Europäische Kommission sich als zahnlos erwies, griff die Europäische Zentralbank (EZB) schnell, entschlossen und mit geballter Macht ein (FSB 2021a). Sie schuf ein 750 Milliarden Euro schweres Rettungsprogramm, das später auf 1,850 Billionen Euro erhöht wurde – eine Summe, weit höher als der viel gepriesene Hilfs- und Wiederaufbaufonds, der nach mühsamem und konfliktreichem Ringen zwischen den EU-Staaten Mitte 2020 ausgehandelt worden war. Wie konnte es dazu kommen, dass Zentralbanken, die früher kaum beachtet wurden und deren Geldpolitik als langweilig und weitgehend voraussehbar galt, plötzlich zu solch machtvollen und schlagkräftigen Institutionen werden konnten? Wieso kam es zu dieser radikalen Geldpolitik? Und welche politische und politisch-ökonomische Bedeutung ist dieser Entwicklung beizumessen?

This dissertation discusses the influence of shadow banking on financial markets. Global analysis of shadow banking systems requires national data and measurements, it needs to be enhanced and enriched for each jurisdiction to achieve a clear overview. The Turkish case was selected as a noteworthy example, to find out how shadow banking connections work, or do not work, even in a strictly separated regulatory framework. Excessive leverage of the financial system was at the very core centre of the discussions on reasons for the recent financial crisis. It is accused of exacerbating asset price booms and exacerbating the systemic risks. Leverage pro-cyclicality of securities brokers and dealers may provide a window on risk connections which may arise from the shadow banking system. The question that needs to be answered is whether leverage is pro-cyclical or not. The results show that it is pro-cyclical. Eventually, appropriate counter-cyclical regulatory responses are outlined for Turkish securities brokers and dealers as one of the main areas of macro-prudential policies.

La desaceleración del crecimiento de la economía china ha producido un debate apasionante entre numerosos entendidos de la economía asiática, los que opinan que el fenómeno se trata de una fase natural del desarrollo económico de una nación (soft-landing) y los que defienden que China está próxima a un colapso de su economía (hard-landing).
En el presente trabajo pretendemos acercarnos a los aspectos más problemáticos de la economía china y analizar de qué manera interviene el gobierno en la economía del país, qué repercusiones tiene tal intervención y cuáles son los costes que ha soportado la ciudadanía. Bajo el elevado crecimiento se esconden desequilibrios que pueden hacer peligrar su prosperidad.
Hemos incluido un análisis de la política cambiara, el sistema financiero y teoría del ciclo, con el objetivo de averiguar en qué momento del ciclo se encuentra la economía China, tratando de despejar algunas dudas sobre la posibilidad de una burbuja financiera en el país.

Initially presented at a Global Studies Conference in Dubai, this paper explores the role played by Indian Ocean trading hubs in general, and by Dubai in particular during the course of three historically distinct phases of globalization: prior to the appearance of European traders in the Indian ocean; during the growth of European empires; and in the aftemath the of their collapse.

While regulators around the world look to fight shadow banking, many lenders can profit from it. In our recent report, Playing the Shadowy World of Emerging Market Shadow Banking, IEMS Senior Research Fellow Dr. Bryane Michael describes how family and institutional lenders can take advantage of shadow banking opportunities in emerging markets.

Little has contributed more to the emergence of today's world of financial globalization than the setup of the international monetary system. In its current shape, it has a hierarchical structure with the US-Dollar (USD) at the top and various other monetary areas forming a multilayered periphery to it. A key feature of the system is the creation of USD offshore-a feature that in the 1950s and 60s developed in co-evolution with the Bretton Woods System and in the 1970s replaced it. Since the 2007-9 Financial Crisis, this 'Offshore US-Dollar System' has been backstopped by the Federal Reserve's network of swap lines which are extended to other key central banks. This systemic evolution may continue in the decades to come, but other systemic arrangements are possible as well and have historical precedents. This article discusses four trajectories that would lead to different setups of the international monetary system by 2040, taking into account how its hierarchical structure and the role of offshore credit money creation may evolve. In addition to a continuation of USD hegemony, we present the emergence of competing monetary blocs, the formation of an international monetary federation and the disintegration into an international monetary anarchy.

The 2007–09 crisis made visible how banks, rating agencies and non-bank actors, such as hedge funds or money market mutual funds, have created a new network around practices of securitisation and repurchase agreements. Even though these transformations were widely known about by the early 2000s, it is only after 2007 that they were associated with the ‘shadow banking system’. Whether we deal with volatile investment streams, the innovations in financial practices, or the dynamic reconfiguration of the global financial system, shadow banking is a crucial aspect of understanding the current debacle that now stands behind many calls for tighter regulation and monitory procedures in financial markets.
The first section of this contribution discusses the three meanings of shadow banking in relation to space, time and agency and shows that regulation becomes an eternal task rather than a one-time solution to a set of given problems. Taking Germany as an example, the second section shows that the current attempt to ‘regulate’ shadow banking ‘creates’ ambiguities in precisely these areas: the demarcation of space, the management of different temporalities, and the identification and regulation of actors. The final section summarises the argument and tries to outline an alternative approach incorporating the social dimension of financial practices and how it relates to political order.

The Xi-Li administration faces the dual challenge of managing state capitalism and shadow banking as China enters a phase of more moderate economic growth. During China’s first
three decades of reform, private sector development occurred in parallel with prioritization of state-owned enterprises in strategic industries, and growth surged. This pattern of state capitalism rested on an unarticulated bifurcated financing arrangement whereby the formal banking system primarily served public enterprises, while private businesses relied primarily on informal finance. However, China’s response to global financial crisis disrupted the preceding equilibrium of financial dualism under state capitalism. Unprecedented expansion of bank lending after 2008 created opportunities for a host of state economic
actors—including SOEs, state banks, and local governments—to expand their participation in off-balance sheet activities.

We show that nonbanks (funds, shadow banks, fintech) affect the transmission of monetary policy to output, prices and the distribution of risk via credit supply. For identification, we exploit exhaustive US loan-level data since the 1990s, borrower-lender relationships and Gertler-Karadi monetary policy shocks. Higher policy rates shift credit supply from banks to nonbanks, thereby largely neutralizing associated consumption effects (via consumer loans), while just attenuating firm investment and house price spillovers (via corporate loans and mortgages). Moreover, different from the risk-taking channel, higher policy rates increase risk-taking, as less-regulated, fragile nonbanks—in all credit markets—expand supply to riskier borrowers.

This chapter illuminates the practices and regulatory aspects of the workings of the shadow banking system. The first section of the chapter points to the institutional qualities of shadow banking as a fundamental part of the broader financial system. The second section presents a view of the inner workings of shadow banking, which are better understood from a legal perspective than from an economic one. The chapter's third section lays out the present regulatory adapta­tions and how they affect the current state of shadow banking. The chapter argues that, in order to understand the shadow banking system, a more finely tuned institutional perspective must be supplemented with a perspective on the social and political contexts which condition (and are also conditioned by) the practices of shadow banking.

On a global scale, the estimated flow of migrant workers’ remittances through formal channels now comfortably exceeds $100 billion per annum, whilst the unrecorded flow through informal channels amounts to at least as much again. During the last few years the IVTS networks through which the latter are transferred have attracted a great deal of attention, both because of a gradual realisation of their scale, and because of fears that they could provide a vehicle for drug smugglers and terrorists to shift funds without fear of detection by the authorities. Recently reinforced AML/CFT regulations aimed at curbing such illegitimate transfers are having an expensive impact on all sections of the financial services industry, no less in the formal than the informal sector. As yet, however, remarkably little attention has been paid to the basis on which the so-called ‘underground’ networks in the informal sector actually operate, the basis on which they organise and guarantee the security of their financial operations, let alone the extent to which they may have developed their own internal mechanisms for keeping drugs-smugglers and terrorist financiers at bay.

Reflexive relations of finance and regulation point to the importance of shadow banking and its role for global financial hierarchies. Pierre Bourdieu discussing the production of the economic field accentuated the power struggle involved when it comes to processes of (economic) integration. This chapter, thus, highlights the role of shadow banking and its regulation for integrating the global financial field. Following Bourdieu, it argues that the homogenisation of the standard setting discourse, i.e. international financial regulation, after the recent financial crisis further concentrates the resources for domination on a global scale via the reflexive process of finance and its regulation along the problem of shadow banking.

Since the mid-2010s, with memories of the global financial crisis of 2008 (GFC) progressively fading, there has been increasing recognition of the potential contributions of market-based finance. This refers to credit intermediation conducted by non-bank entities, effectively what was termed in 2007 shadow banking. A number of policy-makers in the post-crisis years have praised the opportunity to reconcile shadow banking with resilient market-based channels of intermediation. The G30 in 2016 stressed particularly the potential that lies in securitisation and other forms of market-based finance. In the process though, market-based finance is also proposing the re-emergence of a business model that in the pre-crisis years was known as securitised banking.
The post-crisis narrative suggests that the regulatory corrections that have been implemented since 2008 should contribute to transforming shadow banking into resilient market-based finance. The Basel III framework sits at the heart of the post-crisis regulatory architecture, and it was designed to protect large financial institutions from the risks flowing from market-based channels of intermediation. This general optimism though clashed with the economic slowdown caused by the covid19 pandemic in the spring of 2020, particularly insofar as it exposed some deep-seated fragilities in the financial system.
This article therefore engages with a critical appraisal of that regulatory edifice, analysing in particular its capacity to respond to risks associated with pre-2008 securitised banking, as well as the challenges emerging from the more recent morphing in market-based channels of intermediation. The new Basel framework appears to provide the necessary safeguards to guarantee the stable operations of restored capital markets. This article observes though that despite providing much needed regulatory improvements from the pre-crisis regime, the current framework is still falling short in protecting the financial system from the risks that are generated by the evolution of market-based finance.

El presente artículo analiza la importancia de la seguridad jurídica en la banca paralela (shadow banking) y en particular en el ejercicio de la actividad de financiación participativa (crowdfunding). La Ley de fomento de la financiación empresarial, que regula el crowdfunding en España, ofrece certidumbre y previsibilidad a las plataformas de financiación participativa y pude servir de modelo para la regulación de otras actividades de banca paralela. Sería deseable contar con un marco global para el desarrollo del crowdfunding y del resto de actividades de banca paralela

This forum contribution explains how analyzing the creation, distribution, and destruction of contemporary credit money is placed center stage in the emerging field of critical macro- finance. This approach not only involves traditional forms of money but also ‘shadow money’: private credit instruments which are not regulated as money from a legal standpoint, but in many respects are functionally equivalent to ‘established’ forms of money. Shadow money lay at the heart of the 2007-9 financial crisis and continues to be one of the ‘hot potatoes’ in the post-crisis monetary system. To connect different positions in this discourse, we propose three core criteria for defining shadow money as a baseline position for future critical macro-financial research.

Shadow banking became a trendy topic of argument for restructuring the financial system after the global financial crisis. Shadow banking is handled in conceptual manner in this thesis, and the conversion of special finance houses in Turkey to participation banks as a more important actor in the financial system is proved to be a shadow banking experience by an empirical analysis. Moreover, the findings of the econometric model have shown that the selected performance criteria were negatively affected after the conversion. The findings on the negative effects of the conversion are also supported by the tendencies that are inclined downwards.

Mr Ding Hui, the chairman and chief executive of a Hong Kong-listed fashion retailer, Fujian Nuoqi Co Ltd, suddenly went missing in July 2014. As a result, the company’s share price slumped by more than 50% in three consecutive days. It remained mysterious about Mr Ding’s motivation for abandoning his business empire, but later on news report revealed that the incident had something to do with his enormous debts owed to several moneylenders. In China, the state-dominated banking sector is reluctant to lend to private-owned businesses, so entrepreneurs often have to borrow money from shadow banks to fund their business ventures. According to one estimate, the market scale of China’s informal financial system amounted to 5 trillion yuan (US$806 billion). However, in absence of regulation, private lending led to a series of credit crisis in recent years, which has been evidenced by an increasing number of insolvent businesses and runaway bosses. In response to this, the Chinese authority has launched a series of financial reform in order to effectively regulate the rampant lending market and improve the availability of credits for money-starved entrepreneurs. Most recently, China’s first financial regulation regarding private lending, “Wenzhou Private Financing Regulation”, came into effect in 2014, which created a registration-based regulatory regime. This article aims to examine the popular phenomenon of runaway bosses in China. It will try to find out why the private lending mechanism inevitably led to credit crunches and fugitive bosses recently, as well as to analyse the tentative regulatory system regarding private financing.

This paper uses a historical study to show a solution to the trade-off faced by central banks between providing liquidity to a broad group of financial intermediaries and the risk that this easy access may fuel moral hazard. In late 19th century the Bank of France operated a very wide discount window and used a variety of risk management techniques to effectively subdue risk taking behaviors and to protect its balance sheet from taking any loss. This allowed agents to monetize a very diverse set of capital while limiting the risk of bail-out. We show that this effectively helped the central bank to stabilize the economy from the consequences of negative income shocks.

Der Beitrag untersucht die Geldpolitik der Zentralbanken, die es erstmals auch Nichtbanken ermöglicht, Geld zu schöpfen. Hierfür wird das Konzept der Liquiditätsketten entwickelt. Eine Liquiditätskette beschreibt ein komplexes politisch-institutionelles Ensemble, welches bestimmte Vermögenswerte in Geld bzw. in einen Vermögenswert mit höherer Liquidität umwandelt. Es wird argumentiert, dass durch finanzmarktinterne Prozesse diverse Kreditformen mit unterschiedlicher Liquidität geschaffen werden. Geld und Quasi-Geld hingegen können allein aufgrund politischer Prozesse entstehen, die über (staatlich) institutionalisierte Liquiditätsketten aus einem Vermögenswert einen allgemeinen Wertmaßstab generieren. Als sich die globale Finanzkrise 2008 zuspitzte, war die bestehende Liquiditätskette zwischen Banken und Zentralbanken nicht in der Lage, die Krise zu stoppen. Grund hierfür war, dass die bestehenden Liquiditätsketten nicht das Schattenbankensystem erreichten. Es musste eine neue Liquiditätskette geschaffen werden, um auch das Schattenbankensystem mit Geldmitteln versorgen zu können. Es handelt sich hierbei um einen historisch einzigartigen Schritt, da nun auch Akteure aus dem Schattenbankensystem in der Lage sind, Geld zu schöpfen. Ziel des Beitrags ist es, neben der Analyse dieser unkonventionellen Geldpolitik ein dezidiert politisches Verständnis des Geldes und der Geldschöpfung zu entwickeln.

O  objetivo  deste  estudo  é  analisar  as  possíveis  consequências e desafios regulatórios do aumento das operações fora do balanço nos bancos e da expansão do sistema bancário sombra, alertando sobre possíveis implicações ao risco sistêmico. Particularidades das operações fora de balanço são discutidas, tais como a contabilização de contingências passivas e instrumentos financeiros e  a  normas  de consolidação  de  relato  financeiro.  A  tipologia  das  operações fora do balanço, garantias e compromissos contingentes e  contratos  derivados,  é apreciada,  bem  como  quais  seriam  as  hipóteses econômicas que justificariam a expansão destas atividades no sistema bancário. Ainda nas operações fora do balanço identificam-se os principais riscos financeiros que essas atividades transmitem para as instituições financeiras. O sistema bancário sombra, após delimitado, é apreciado no tocante a sua evolução e riscos ao sistema financeiro.  Conclui-se  propondo  que  seja  repensada  a  regulação prudencial do sistema financeiro, dando especial ênfase ao que aprendemos da crise de 2008, e como criar mecanismos para tratar os riscos associados as operações fora do balanço e sistema bancária  sombra.  Recomenda-se  reforço  das  atividades  de  gestão  de riscos e o incentivo a transparência e demonstrações contabilísticas mais fidedignas.