by Tobias Adrian, Adam B. Ashcraft, and Nicola Cetorelli – Federal Reserve Bank of New York
The shadow banking system consists of a web of specialized financial institutions that conduct credit, maturity, and liquidity transformation without direct, explicit access to public backstops. The lack of such access to sources of government liquidity and credit backstops makes shadow banks inherently fragile. Shadow banking activities are often intertwined with core regulated institutions such as bank holding companies, security brokers and dealers, and insurance companies. These interconnections of shadow banks with other financial institutions create sources of systemic risk for the broader financial system. This post lays out elements of monitoring risks in the shadow banking system, including recent efforts by the Financial Stability Board.
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source: http://www.newyorkfed.org/research/staff_reports/sr638.html
