Shadow banking – a system of credit creation outside traditional banks – lies at the very heart of the global economy. It accounts for over half of global banking assets, and represents a third of the global financial system. Although the term ‘shadow banking’ only entered public discourse in 2007, the importance and scope of this system is now widely recognised by the international policy-makers. There is, however, much less consensus on the origins of the shadow banking system, what role it plays in global political economy and the optimal approach to regulating this complex segment of finance. This volume addresses these questions.
Shadow Banking is the first study to bring together the insights from financial regulators, practitioners and academics from across the social sciences. The first part traces the evolution and ongoing confusion about the meaning of ‘shadow banking’. The second section draws major lessons about shadow banking as posed by the financial crisis of 2007–09, providing comparative analyses in the US and Europe, and attempts to establish why shadow banking has emerged and matured to the level of a de facto parallel financial system. Finally, the third part goes beyond current regulatory concerns about shadow banking and explains why it is ‘here to stay’.
This volume is of great importance to political economy, banking and international political economy.
‘It is a path-breaking work, the first systematic treatment of shadow banking from a wide range of theoretical angles, bridging heterodox economics, political economy and sociology.’ — Professor Dr. Andreas Nölke, Goethe-Universität Frankfurt am Main, Germany
SHADOW BANKING: THE POLITICAL ECONOMY OF FINANCIAL INNOVATION
PART I. SCOPING THE SHADOW BANKING SYSTEM
CHAPTER 1. SHADOW BANKING: A VIEW FROM THE USA
CHAPTER 2. THE TRANFORMATION OF BANKING
CHAPTER 3. HOW SHADOW BANKING BECAME NON-BANK FINANCE: THE CONJUCTURAL POWER OF ECONOMIC IDEAS
CHAPTER 4. SHADOW BANKING, GERMAN BANKING AND THE QUESTION OF POLITICAL ORDER
Oliver Kessler and Benjamin Wilhelm
CHAPTER 5. SHADOW BANKING IN CHINA: INSTRUMENTS, ISSUES, TRENDS
Jianjun Li and Sara Hsu
CHAPTER 6. THE TWO SHADOW BANKING SYSTEMS IN RUSSIA
PART II. CRISIS AND BEYOND. SHADOW BANKING AND ITS ORIGINS
CHAPTER 7. THE SHADOW BANKING SYSTEM DURING THE FINANCIAL CRISIS OF 2007-08: A COMPARISON OF THE US AND THE EU
CHAPTER 8. EUROPEAN MONEY MARKET FUNDS: A STUDY OF THE MARKET MICRO-PROCESSES
Viktoria Baklanova and Joseph Tanega
CHAPTER 9. SHADOW CONNECTIONS. ON HIERARCHIES OF COLLATERAL IN SHADOW BANKING
CHAPTER 10. INVESTMENT FUNDS, SHADOW BANKING AND SYSTEMIC RISK
PART III. BANKING ON THE FUTURE: THE STRUCTURAL DEMAND FOR FINANCIAL INNOVATION
CHAPTER 11. WHY OVERCAPITALIZATION DRIVES BANKS INTO THE SHADOWS
CHAPTER 12. THE FUTURE FOR THE TOP 1%: THE REAL ROLE OF HEDGE FUNDS IN THE SUBPRIME CRISIS
CHAPTER 13. THE ECONOMY OF DEFERRAL AND DISPLACEMENT: FINANCE, SHADOW BANKING AND FISCAL ARBITRAGE
Ronen Palan, Mike Rafferty and Duncan Wigan
CHAPTER 14. SHADOW BANKING AND THE CHALLENGES FOR CENTRAL BANKS
Thorvald Grung Moe
SHADOW BANKING: INTO THE LIMELIGHT
The 2007-8 Banking Crash has induced a major and wide-ranging discussion on the subject of financial (in)stability and a need to revaluate theory and policy. The response of policy-makers to the crisis has been to refocus fiscal and monetary policy on financial stabilisation and reconstruction. However, this has been done with only vague ideas of bank recapitalisation and ‘Keynesian’ reflation aroused by the exigencies of the crisis, rather than the application of any systematic theory or theories of financial instability.
Routledge Critical Studies in Finance and Stability, edited by Jan Toporowski from SOAS, University of London covers a range of issues in the area of finance including instability, systemic failure, financial macroeconomics in the vein of Hyman P. Minsky, Ben Bernanke and Mark Gertler, central bank operations, financial regulation, developing countries and financial crises, new portfolio theory and New International Monetary and Financial Architecture.