Shadow Banking Flashcards
what are shadow banks
Shadow banking captures financial intermediaries that conduct maturity, credit and liquidity transformation without access to central bank liquidity or public sector credit guarantees.
discuss securitisation
Broadly, securitisation refers to a technique that transforms illiquid assets into liquid and tradable instruments.
This technique allows the removal of loans from the asset side of the balance sheet and distributes the associated risks to other financial units.
how did shadow banks contribute to the financial crisis
use of securitisation
subprime mortgage crisis
unable to turn over short term debt
lehman brothers and bear sterns
fall of ABS and ABCP markets
run on MMFs
when did shadow banking get renamed
On 22 October 2018, the Financial Stability Board (FSB) announced its decision to replace the term ‘shadow banking’ with the term ‘non-bank financial intermediation’ (NBFI).
discuss shadow banking in china
The total assets of Shadow Banks have declined over the last years compared to GDP, however, there has been an increase in the total assets of Shadow Banks over GDP in China.
Since 2009, the shadow banking sector in China has experienced a significant growth and has contributed to the financing of firms and households.
discuss repos
Sale of securities coupled with an agreement to repurchase the same securities at a higher price on a later date. A repo is similar to a collateralised loan.
what is the repo rate
The excess of the repurchase price over the purchase price (cash), divided by the purchase price.
what is the haircut rate
The excess of the market value of the securities purchased over the purchase price (cash), divided by the market value of securities.
