Parallel, rather than ‘shadow’, banking system

Abstract

The articles raises questions relating to the ongoing review of the parallel, rather than ‘shadow’, banking system and the attempts to potentially regulate it. The author argues that the starting point for the public discussion should be a neutral (rather than negatively biased) review of the need for and the utility of the parallel banking system, the degree of its interaction with the traditional banking system and the empirical evidence of its role in recent financial market developments, rather than the negatively biased and empirically unjustified starting point adopted to-date. The author emphasises the need for a properly functioning parallel banking system and raises questions about the regulatory objectives and approaches in its monitoring and supervision.