The Nonbank-Bank Nexus and the Shadow Banking System

Author/Editor:

Manmohan Singh ; Zoltan Pozsar

Publication Date:

December 1, 2011

Electronic Access:

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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:

The present way of thinking about financial intermediation does not fully incorporate the rise of asset managers as a major source of funding for banks through the shadow banking system. Asset managers are dominant sources of demand for non-M2 types of money and serve as source collateral ?mines' for the shadow banking system. Banks receive funding through the re-use of pledged collateral ?mined' from asset managers. Accounting for this, the size of the shadow banking system in the U.S. may be up to $25 trillion at year-end 2007 and $18 trillion at year-end 2010, higher than earlier estimates. In terms of policy, regulators will need to consider the re-use of pledged collateral when defining bank leverage ratios. Also, given asset managers' demand for non-M2 types of money, monitoring the shadow banking system will warrant closer attention well beyond the regulatory perimeter.

Series:

Working Paper No. 11/289

Subject:

Frequency:

Monthly

English

Publication Date:

December 1, 2011

ISBN/ISSN:

9781463927233/1018-5941

Stock No:

WPIEA2011289

Price:

$18.00 (Academic Rate:$18.00)

Format:

Paper

Pages:

19

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