scholarly journals The effects of shadow banking on the traditional banking system in Zimbabwe

2015 ◽  
Vol 4 (4) ◽  
pp. 605-611
Author(s):  
Virimai Mugobo ◽  
Misheck Mutize
Keyword(s):  
Banking Sector ◽  
Banking System ◽  
Good Alternative ◽  
Bank Loan ◽  
Critical Element ◽  
Shadow Banking ◽  
Shadow Banks ◽  
The Face ◽  
Shadow Banking System ◽  
Market Needs

The growth of shadow banks changed the face of banking in Zimbabwe. Their inconsistent product nature and complexity of form has been a cause for concern to regulatory authorities. The interrelationship between their financial intermediary role and that of formal banks has made them good substitutes to formal banking. This study conducts a statistical analysis of the country’s monetary aggregates and the total formal bank loan-to-deposits balances. The findings of this analysis show that the shadow banking system has always been a critical element of the formal banking sector which resulted from market needs and it completes the banking system. The shadow banking system does not pose direct threat to the formal banking system but it was a result of failure to attract savers who found shadow banks as a good alternative.

scholarly journals Shadow Banking in India: Nature, Trends, Concerns and Policy Interventions

2019 ◽  
Vol 12 (2) ◽  
pp. 29-46
Author(s):  
Sashi Sivramkrishna ◽  
Soyra Gune ◽  
Kasturi Kandalam ◽  
Advait Moharir
Keyword(s):  
Banking Sector ◽  
Banking System ◽  
Shadow Banking ◽  
Secondary Sources ◽  
Shadow Banks ◽  
Massive Growth ◽  
Policy Interventions ◽  
Systemic Risks ◽  
Credit Cycle ◽  
Shadow Banking System

AbstractWhile 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.

Conclusion

2020 ◽  
pp. 335-356
Author(s):  
Arthur E. Wilmarth Jr.
Keyword(s):  
Conflicts Of Interest ◽  
Banking System ◽  
Financial System ◽  
Safety Net ◽  
Shadow Banking ◽  
Financial Conglomerates ◽  
Shadow Banks ◽  
Regulatory Systems ◽  
Shadow Banking System ◽  
Investment Advisers

A new Glass-Steagall Act would break up universal banks and end the conflicts of interest that prevent universal banks from acting as objective lenders and impartial investment advisers. It would produce a more stable and resilient financial system by reestablishing structural buffers to prevent contagion between the banking system and other financial sectors. It would improve market discipline by preventing banks from transferring their safety net subsidies to affiliates engaged in capital markets activities. It would shrink the shadow banking system by prohibiting nonbanks from issuing short-term financial claims that function as deposit substitutes. It would remove the dangerous influence that large financial conglomerates exercise over our political and regulatory systems. It would end the current situation in which our financial system and our economy are held hostage to the survival of universal banks and large shadow banks. It would restore our banking system and financial markets to their proper roles as servants—not masters—of nonfinancial business firms and consumers.

scholarly journals Macroeconomic Determinants of Shadow Banking – Evidence from EU Countries

2016 ◽  
Vol 9 (2) ◽  
pp. 111-129 ◽  
Author(s):  
Teodora Cristina Barbu ◽  
Iustina Alina Boitan ◽  
Sorin Iulian Cioaca
Keyword(s):  
Interest Rates ◽  
Banking Sector ◽  
Banking System ◽  
Point Of View ◽  
Stock Index ◽  
Shadow Banking ◽  
Investment Funds ◽  
Banking Regulations ◽  
Shadow Banking System ◽  
Macroeconomic Determinants

AbstractShadow banking is a topical, debated issue on the agenda of national and European macro-prudential regulatory and supervisory authorities. It is generally accepted that shadow banks and the traditional banking system have some core functions in common, such as credit and maturity transformation, and the exposure to similar risks. However, the tight banking regulations and the decreasing trend recorded by interest rates in the post-crisis period create prospects for shadow banking sector growth. Against this background, the present paper aims at investigating the particular impact that shadow banking activity exerts on macroeconomic fundamentals. The analysis covers 15 European Union countries, including Romania, during the period 2008 – 2015, using quarterly data. Shadow banking system is used as a proxy by monetary funds, due to breaks in the series or unbalanced number of observations across selected countries. By employing panel regression, it was found that the shadow banking total assets’ variation is negatively influenced by the GDP growth, short term interest rates, M2/GDP ratio and the ratio of investment funds’ assets in GDP, and positively determined by stock index dynamics and long term interest rates. The findings sustain the literature’s point of view

scholarly journals When Brussels meets shadow banking – Technical complexity, regulatory agency and the reconstruction of the shadow banking chain

2020 ◽  
Vol 24 (3-4) ◽  
pp. 225-247
Author(s):  
Vanessa Endrejat ◽  
Matthias Thiemann
Keyword(s):  
Mutual Funds ◽  
Banking Sector ◽  
Time Pressure ◽  
Banking System ◽  
Money Market ◽  
Shadow Banking ◽  
Money Market Mutual Funds ◽  
High Maturity ◽  
Shadow Banking System ◽  
Bank Balance Sheets

At the heart of the last financial crisis stood the shadow banking system, a mesh of financial activities and entities that grew outside of bank balance sheets but with the support of the banking sector. These activities were not regulated or supervised like banks, and they were characterized by high maturity mismatches and leverage. Two prime elements were Money Market Mutual Funds and Asset-Backed Commercial Papers, which jointly performed bank-like functions. This paper sheds light on the fate of these entities post-crisis and the regulatory dynamics at play as policymakers shifted their focus from constraining their activities to drafting a European regulatory infrastructure that delivers both stability and growth. Based on expert interviews and document analysis, we show how European policymakers opened up to private experts during this shift to learn about the technical complexity of Money Market Mutual Funds and Asset-Backed Commercial Papers, but in the end were restricted in their efforts to craft such regulation due to competing national factions and the legislative time pressure at the European level. We argue that the process was heavily influenced by, first, nationally held visions about the future role of financial markets that came to the fore at pivotal moments during the negotiations, and, second, the specific European institutional set-up and its electoral cycle.

Funny Money or Legitimate Finance? Shadow Banking and Policy Impacts in China

2021 ◽  
pp. 000276422110200
Author(s):  
Sara Hsu ◽  
Xun Han
Keyword(s):  
Banking Sector ◽  
Banking System ◽  
Financial System ◽  
Financial Sector ◽  
Banking Regulation ◽  
Shadow Banking ◽  
Data Set ◽  
Money Flows ◽  
Shadow Banking System ◽  
The Impact

Government officials in China have taken different views regarding shadow banking. Some have seen the industry as overly risky, potentially undermining the formal financial system, while others have asserted that it is an increasingly important part of the financial system, filling a gap in finance provision to particular sectors and smaller firms. Do their views matter? Regulators have striven to crack down on the riskiest practices in shadow banking, but are the policies effective? In this article, we analyze the impact of government attitudes and actions on the shadow banking sector. Using a unique data set based on information collected from various sources in a difference-in-difference model, we find that shadow banking regulation plays a strong role in China’s financial sector, while contradictory government views (in the form of commentary in the People’s Daily) on shadow banking do not. This reveals that shadow banking is strongly affected by political authority when it is codified into regulation. Only some aspects of shadow banking can be legitimized through regulation, while the remainder of China’s financial system remains constrained due to state dominance over the financial sector. This underscores the “funny” nature of shadow banking’s money flows. This article is one of the first to study the effects of government views and regulations on the shadow banking system.

scholarly journals Shadow Banking, Bank Liquidity and Monetary Policy Shocks in Emerging Countries: A Panel VAR Approach

2020 ◽  
Vol 11 (6(J)) ◽  
pp. 52-65
Author(s):  
Sheunesu Zhou
Keyword(s):  
Monetary Policy ◽  
Banking Sector ◽  
Emerging Market ◽  
Banking System ◽  
Shadow Banking ◽  
Panel Var ◽  
Shadow Banking System ◽  
Monetary Policy Shock ◽  
Positive Shock ◽  
The Impact

The study provides an analysis of the relationships between monetary policy, shadow banking and bank liquidity in emerging market economies. It is aimed at broadening knowledge on the effect of shadow banking on monetary policy transmission. Furthermore, the study seeks to analyze the impact of changes in bank liquidity on the growth of the shadow banking sector. We employ panel VAR technique to analyse the dynamics of monetary policy, shadow banking and bank liquidity using data for 15 emerging economy countries. A contractionary monetary policy shock results in a decrease in shadow banking and a decrease in bank liquidity. We also find that a positive shock in bank liquidity increases shadow bank growth and a positive shock in shadow banking also increases bank liquidity. The results point to complementarity between shadow banking and bank liquidity; and the interconnectedness between the two markets in emerging economies. We suggest continuous monitoring of shadow banking activities to minimize transmission of risk from the shadow banking system into the banking sector.

scholarly journals Development of the shadow banking system in Zimbabwe: A blessing from the shadows?

2015 ◽  
Vol 4 (4) ◽  
pp. 323-326
Author(s):  
Misheck Mutize ◽  
Virimai Victor Mugobo
Keyword(s):  
Regulatory Focus ◽  
Qualitative Data ◽  
Banking System ◽  
Shadow Banking ◽  
International Banking ◽  
Shadow Banks ◽  
Financial Products ◽  
Banking Institutions ◽  
Market Driven ◽  
Shadow Banking System

The rising of shadow banking institutions in Zimbabwe has been very quick for formal banking institutions and regulators to strategise against the threats that came with their development. This study applied qualitative data analysis and find that, the growth of a shadow banking system was market driven. Lack of confidence and financial innovation on the mainstream banking system to structure financial products that improve intermediation gave space for shadow banking growth. In response to this development, the researcher recommended that regulatory focus should be on the functions of shadow banks rather than institutions; this will be more inclusive and efficient in avoiding innovative creation of new entities that perform the same shadow banking functions. Also, the Zimbabwean formal banking system should be innovative in-line with the development of the international banking models

scholarly journals A Model of Endogenous Loan Quality and the Collapse of the Shadow Banking System

2018 ◽  
Vol 10 (4) ◽  
pp. 152-201 ◽  
Author(s):  
Francesco Ferrante
Keyword(s):  
Banking System ◽  
Shadow Banking ◽  
Macroeconomic Model ◽  
Unconventional Monetary Policy ◽  
Informational Frictions ◽  
Credit Availability ◽  
Shadow Banks ◽  
Shadow Banking System ◽  
Loan Quality

I develop a macroeconomic model in which banks can affect loan quality by exerting costly screening effort. Informational frictions limit the amount of external funds that banks can raise. In this framework, I consider two types of financial intermediation: traditional banking and shadow banking. By pooling different loans, shadow banks achieve a higher endogenous leverage compared to traditional banks, increasing credit availability. However, shadow banks also make the financial sector more fragile because of the lower quality of the loans they finance and because of their exposure to bank runs. In this setting, unconventional monetary policy can reduce macroeconomic instability. (JEL E32, E44, E52, G01, G21, G23, L25)

Financing Russian firms: Ireland and round tripping

2020 ◽  
Vol ahead-of-print (ahead-of-print) ◽  
Author(s):  
Cillian Doyle ◽  
Jim Stewart
Keyword(s):  
Design Methodology ◽  
Banking Sector ◽  
Banking System ◽  
Shadow Banking ◽  
Professional Networks ◽  
Content Type ◽  
Form Part ◽  
Charitable Trust ◽  
Shadow Banking System ◽  
Gross Flows

Purpose Ireland has become one of the main sources of finance for Russian based firms. The purpose of this paper is to quantify and analyse these flows to examine governance and regulatory issues, in particular the possible effect of sanctions. Design/methodology/approach The paper is based on detailed searches of publicly available filings in Company House, Ireland to identify Russian connected conduits. Data was extracted from available accounts and prospectuses for 106 conduits operating in Ireland for some or all of the period 2005-2017. Findings The paper shows gross flows from Irish based conduits to Russian firms amounted to €118bn for 2005-2017; flows may be partly explained by round tripping; sanctions have also affected flows; flows are facilitated by close linkages with professional networks both within Ireland, and other offshore financial centres, especially London; The conduits examined have no employees and are mostly owned by a charitable trust or trust. They have become a major part of a largely unregulated shadow banking system. Originality/value This paper used searches of publicly available company filings to create a unique database of individual firms. Data on the use of financial centres by individual firms is hard to obtain and the results of this study may be indicative of the use and nature of conduits in other financial centres which form part of the shadow banking sector.

scholarly journals Overhauling China’s Financial Stability Regulation: Policy Riddles and Regulatory Dilemmas

2017 ◽  
Vol 4 (1) ◽  
pp. 1-57 ◽  
Author(s):  
Emilios AVGOULEAS ◽  
Duoqi XU
Keyword(s):  
Financial Stability ◽  
Banking Sector ◽  
Financial Regulation ◽  
Banking System ◽  
Big Bang ◽  
Shadow Banking ◽  
Financial Repression ◽  
Leverage Ratio ◽  
Regulation Policy ◽  
Shadow Banking System

AbstractChina faces a number of important financial-stability risks. A persistent feature of the Chinese banking sector is the rapid formation of non-performing loans (NPLs) during each business cycle. Moreover, lending restrictions and interest-rate caps (“financial repression”) have, in part, given rise to an ever-expanding shadow-banking sector. The article highlights five cardinal sins within the Chinese financial system: (1) bad lending practices by the regulated sector, (2) lax governance, (3) a shadow-banking system that is dominated by short-term claims with no liquidity backstop, (4) stark lack of transparency in the shadow sector, and (5) very high levels of interconnectedness between the shadow and the regulated sector. The article suggests that some of these problems will be alleviated through a regulatory big bang that would abolish the current silo approach to financial regulation streamlining financial stability and conduct/consumer-protection supervision. Furthermore, we recommend the introduction of a binding and all-encompassing leverage ratio that will require banks to hold much higher capital buffers as a means to boost bank resilience, reduce NPLs, and battle interconnectedness with the shadow sector.

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