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Shadow Banking (Staff Report no. 458, July 2010, revised February 2012)

Zoltan Pozsar, Tobias Adrian, Adam Ashcraft, Hayley Boesky — Federal Reserve Bank of New York

Claims Supported by This Source

  1. Shadow bank = A financial intermediary that conducts maturity, credit, and liquidity transformation without explicit access to central bank liquidity or public credit guarantees. Examples: finance companies, ABCP conduits, SIVs, credit hedge funds, MMFs, securities lenders, GSEs.
  2. Figure 1: Shadow bank liabilities (gross) were nearly $22 trillion in June 2007, while traditional bank liabilities were about $14 trillion in 2007. They shrank by $5 trillion after the peak.
  3. The bank run started in the summer of 2007 and peaked in September-October 2008. Confidence vanished the moment the solvency of private guarantors was questioned. Public liquidity provision and guarantees replaced private ones, leading to stabilization. Everyone underestimated the correlation of asset prices.

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