The Shadow Banking System 2017 | Castille Resources | 25 May 2017 | Floriana, Malta

A new phenomenon? “Shadow banking” is a term that is highly resistant to definition.
The term is related to a broad spectrum of activities and entities that are usually
posited as falling outside traditional “banking”.
Shadow banking often complements traditional banking by engaging in credit
intermediation activities, thereby deepening market liquidity and broadening access to
funding. This can enhance efficiency and not only contributes to the growth of the
financial sector but to overall growth in the “real” economy, for example by providing
increased funding resources to small and medium-sized enterprises (SMEs) and
individuals.
However, the shadow banking sector often comes under criticism due to the perceived
risks associated with its activities including interconnectedness with and
“contamination” of traditional banking and lack of regulation. Following the latest
Financial Crisis, shadow banking has become ever more competitive in the global
financial system. Why so? Can or should it be controlled?

Dr. Stefan Berry

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