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Shadow Banking Entities

  • Valerio Lemma
Part of the Palgrave Macmillan Studies in Banking and Financial Institutions book series (SBFI)

Abstract

By shadow banking entities, I refer to the subjects operating in the process that transforms “loans to real economy” into “financial instruments” (see Table 3.1).

Keywords

Corporate Governance Monetary Policy Mutual Fund Credit Default Swap Asset Manager 
These keywords were added by machine and not by the authors. This process is experimental and the keywords may be updated as the learning algorithm improves.

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Notes

  1. 1.
    See Gorton and Souleles (2005) “Special Purpose Vehicles and Securitization,” FRB Philadelphia Working Paper, no. 05-21, where the authors analyze securitization and special purpose vehicles (SPVs), which are more common in corporate finance praxis.Google Scholar
  2. 2.
    See Fabozzi and Kothari (2007) “Securitization: The Tool of Financial Transformation,” Yale ICF Working Paper, no. 07-07, where the authors find that, in a broadest sense, the term “securitization” implies a process by which a financial relationship is converted into a transaction.Google Scholar
  3. 3.
    See Lucas, Goodman, and Fabozzi (2007) “Collateralized Debt Obligations and Credit Risk Transfer,” Yale ICF Working Paper, no. 07-06, where the authors emphasize the role played by CDOs in the application of the securitization technology and in the credit risk transformation schemes.Google Scholar
  4. 4.
    See Coval, Jurek, and Stafford (2008) “The Economics of Structured Finance,” Harvard Business School Finance Working Paper, no. 09-060, where the authors examine how the process of securitization allowed a big amount of risky assets to be transformed into securities that were widely considered to be safe. They argue that at the core of the financial market crisis has been the discovery that these securities are actually far riskier than originally advertised.Google Scholar
  5. 5.
    It goes without saying that the link mentioned in the text suggests the inclusio of SPVs within the consolidation range of the relevant banking group (in a capital adequacy perspective), for a pre-crisis analysis of the securitization legal framework that explains this problem, see Troiano (2003) Le operazioni di cartolarizzazione (Padova), where the author takes into consideration both the EU regulation and the Italian legislation.Google Scholar
  6. 9.
    See Becht, Bolton, and Röell (2002) “Corporate Governance and Control,” ECGI—Finance Working Paper, no. 02/2002, where the authors identify a specific corporate governance dilemma whether the intervention of a large shareholder needs to be regulated in order to guarantee a better protection for small investors, taking into account that such a rule increases managerial discretion and scope for abuse.Google Scholar
  7. 10.
    See Guida and Masera (eds) (2014) Does One Size Fit All?, passim, where the authors state that “an important lesson of the global financial crisis was that the Basel II microprudential capital requirements did not ensure financial stability.” Another significant lesson was that they had even destabilizing effects by increasing procyclical lending and regulatory arbitrage.Google Scholar
  8. 11.
    See Tosun and Senbet (2014) “Internal Control and Maturity of Debt,” WBS Finance Group Research Paper, where they investigate the various effects of internal board monitoring on firms’ debt maturity structure.Google Scholar
  9. 14.
    See Babis (2014) “Single Rulebook for Prudential Regulation of Banks: Mission Accomplished?”, European Business Law Review (Forthcoming), University of Cambridge Faculty of Law Research Paper, no. 37/2014, where the author focuses on the prudential regulation aspects of the rulebook, examinating whether the CRR/CRD 4 framework has created a truly single rulebook by identifying possible threats to uniformity.Google Scholar
  10. 15.
    See Keynes (1953) The General Theory of Employement, Interest, and Money, cit., pp. 338–339.Google Scholar
  11. 19.
    See Pozsar, Adrian, Ashcraft, and Boesky (2012) Federal Reserve Bank of New York Staff Reports — Shadow Banking, cit., p. 1, where it is highlighted that the specialized shadow bank intermediaries are bound together along an intermediation chain.Google Scholar
  12. 20.
    See Schwarcz (2013) “Regulating Shadows: Financial Regulation and Responsibility Failure,” Washington and Lee Law Review (forthcoming), where the author highlights the modern financial architecture, where financial services are increasingly provided outside of the traditional banking system and without the need for bank intermediation between capital markets and the users of funds.Google Scholar
  13. 22.
    See Meeks, Nelson, and Alessandri (2013) “Shadow Banks and Macroeconomic Instability,” Bank of Italy Working Papers, no. 939, p. 19 ff.Google Scholar
  14. and see also Adrian and Ashcraft (2012) “Shadow Banking Regulation,” FRB of New York Staff Report, no. 559 where the authors highlight how shadow banks conduct credit intermediation without direct or explicit access to public funding or other credit guarantees.Google Scholar
  15. 23.
    See, once more, Meeks, Nelson, and Alessandri (2013) Shadow Banks and Macroeconomic Instability, cit., p. 11.Google Scholar
  16. 26.
    See Goodhart, Kashyap, Tsomocos, and Vardoulakis (2012) “Financial Regulation in General Equilibrium,” Chicago Booth Research Paper, no. 12-11, where the authors analyze how different types of financial regulation combat the financial crisis. They highlight in the Abstract that “the proposed framework can assess five different policy options that officials have advocated for combating defaults, credit crunches and fire sales, namely: limits on loan to value ratios, capital requirements for banks, liquidity coverage ratios for banks, dynamic loan loss provisioning for banks, and margin requirements on repurchase agreements used by shadow banks.”Google Scholar
  17. 27.
    See Zingales (2009) “The Future of Securities Regulation,” Chicago Booth School of Business Research Paper no. 08-27, where the author analyzes investors’ confidence after a crisis, comparing the Great Depression of the 1929 and the recent financial crisis of 2007.Google Scholar
  18. 28.
    See, on this topic, Pennisi (2009) “La responsabilità della banca nell’esercizio del controllo in forza di covenants finanziari,” Rivista di diritto societario, f. 3, pt. 3, p. 627 ff., for an analysis of the duites provided by the Italian legislation.Google Scholar
  19. 30.
    See Moodys’ The Fundamentals of Asset-Backed Commercial Paper, February 3, 2003, available at http://www.imf.org.Google Scholar
  20. 31.
    I refer to the analysis of Adrian (2011) “Dodd-Frank One Year On: Implications for Shadow Banking,” Federal Reserve Bank of New York Staff Report, no. 533, p. 3 where the question of the consolidation of ABCP conduits is analyzed.Google Scholar
  21. 35.
    See Lemma (2006) I fondi immobiliari tra investimento e gestione (Bari), p. 197 ff.Google Scholar
  22. 36.
    See ECB, Guideline of the European Central Bank, of September 20, 2011, p. 14, note 6.Google Scholar
  23. 40.
    See EC, Money Market Funds, Proposal of the Commission, of September 4, 2013, cit.Google Scholar
  24. 42.
    See Carney (2014) “Taking Shadow Banking Out of the Shadows to Create Sustainable Market-Based Finance,” Financial Times, June 16, 2014, where it is said that “the cycle of excessive borrowing in economic booms that cannot be sustained when liquidity dissipates in core fixed income markets.”Google Scholar

Copyright information

© Valerio Lemma 2016

Authors and Affiliations

  • Valerio Lemma
    • 1
  1. 1.Marconi University of RomeItaly

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