Institutional Cash Pools and the Triffin Dilemma of the U.S. Banking System

Author/Editor:

Zoltan Pozsar

Publication Date:

August 1, 2011

Electronic Access:

Free Full Text (PDF file size is 1308 KB).Use the free Adobe Acrobat Reader to view this PDF file

Disclaimer: This Working Paper should not be reported as representing the views of the IMF.The views expressed in this Working Paper are those of the author(s) and do not necessarily represent those of the IMF or IMF policy. Working Papers describe research in progress by the author(s) and are published to elicit comments and to further debate

Summary:

Through the profiling of institutional cash pools, this paper explains the rise of the "shadow" banking system from a demand-side perspective. Explaining the rise of shadow banking from this angle paints a very different picture than the supply-side angle that views it as a story of banks' funding preferences and arbitrage. Institutional cash pools prefer to avoid too much unsecured exposure to banks even through insured deposits. Short-term government guaranteed securities are the next best choice, but their supply is insufficient. The shadow banking system arose to fill this vacuum. One way to manage the size of the shadow banking system is by adopting the supply management of Treasury bills as a macroprudential tool.

Series:

Working Paper No. 11/190

Subject:

English

Publication Date:

August 1, 2011

ISBN/ISSN:

9781462307265/1018-5941

Stock No:

WPIEA2011190

Price:

$18.00 (Academic Rate:$18.00)

Format:

Paper

Pages:

35

Please address any questions about this title to publications@imf.org