Please use this identifier to cite or link to this item: https://hdl.handle.net/10419/251234 
Year of Publication: 
2013
Series/Report no.: 
CITYPERC Working Paper No. 2013-07
Publisher: 
City, University of London, City Political Economy Research Centre (CITYPERC), London
Abstract: 
One of the most important lessons of the global financial crisis has been the deep interconnectedness between the shadow banking system and the regular banking system. These two systems are linked through several channels, of which one of the most important is the financing provided by regular banks to the shadow banking system and vice versa. In addition, regular banks can originate loans that are securitized. Subsequently, part of the securitized instruments may remain on the balance sheet of the originating banks or be found on the balance sheet of other regular banks and shadow banking entities. These links between the two systems can increase contagion and systemic risks, which in turn may affect financial stability. The financial crisis has acutely revealed the negative effects these interconnections can generate. The interconnections are underestimated by the available data because of the difficulties in gathering information on the euro area. Within this context, our paper tries to evaluate and analyze the interconnections between the shadow banking system and the regular banking system within the euro area, both in the pre-crisis period and currently. Finally, some measures to regulate the interconnections between these two systems are raised.
Subjects: 
shadow banking
traditional banking
the European banking system
Document Type: 
Working Paper

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