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Mega-banks

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There is a claim that shadow banking has decreased by 40%. What is shadow banking? Is there a kind of shadow banking that is not toxic?

31 views November 9, 2018 November 26, 2018 cfroagents 0

We follow a broad definition of the shadow banking system, where shadow banking is defined as a system of credit intermediation involving entities and activities outside the regular banking system.

From an economic point of view, the shadow banking system provides alternative funding sources and investment opportunities which can be beneficial to real economic growth. In addition, it enhances diversification and thereby may contribute to a more stable financial system.

However, this alternative system of credit intermediation can also be an additional source of systemic risk, in particular if it involves bank-like risks, such as maturity and liquidity transformation or leverage. The Bundesbank is constantly monitoring these risks for the German financial system and will, if necessary, argue for regulatory changes.

Answered by: Bundesbank

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