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Shadow banking risks in the U.S. and Europe in 2015-2016

04/09/2015

Banks in the U.S. have reduced mortgage lending and other loans to business with mutual funds and private equity funds increasing their share of financing in the U.S. financial system. This comes after tighter regulation of banks in the U.S., as banks reduce their assets and deverage. This is also happening in europe. The IMF points out the risks in the shadow banking system that is not regulated the way banks are. Greg Ip of the WSJ points out that this creates risk of the banks being safer and the financial system becoming less safe. Paul Tucker, a deputy governor of the Bank of England, says financial institutions are constantly looking for areas that are less regulated, and even if they try hard financial system regulators risk failing to catch up at some point.

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Post-Crisis Risk Casts a Darkening Shadow

Wall Street Journal 04.09.2015

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