How I Learned To Stop Worrying And Love Shadow Banking… — Brian Romanchuk

I had an article planned and started, but I got caught up with events. Instead, I just wanted to make a few comments about the dreaded “shadow banking” sector — non-bank finance. I had seen a few articles complaining about lack of regulation and risks posed by shadow banks, which I think is just extrapolating the last financial crisis.

I had written a sequence of articles on banks (first one here), in which I emphasised that financial flows are circular. If the flows are not circular, things break, and you get a crisis. The issue is that shadow banking is outside the view of regulators, and hence things can blow up.