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Celestino Giron

30 April 2012
Shadow banking, as one of the main sources of financial stability concerns, is the subject of much international debate. In broad terms, shadow banking refers to activities related to credit intermediation and liquidity and maturity transformation that take place outside the regulated banking system. This paper presents a first investigation of the size and the structure of shadow banking within the euro area, using the statistical data sources available to the ECB/Eurosystem. Although overall shadow banking activity in the euro area is smaller than in the United States, it is significant, at least in some euro area countries. This is also broadly true for some of the components of shadow banking, particularly securitisation activity, money market funds and the repo markets. This paper also addresses the interconnection between the regulated and the non-bank-regulated segments of the financial sector. Over the recent past, this interconnection has increased, likely resulting in a higher risk of contagion across sectors and countries. Euro area banks now rely more on funding from the financial sector than in the past, in particular from other financial intermediaries (OFIs), which cover shadow banking entities, including securitisation vehicles. This source of funding is mainly shortterm and therefore more susceptible to runs and to the drying-up of liquidity. This finding confirms that macro-prudential authorities and supervisors should carefully monitor the growing interlinkages between the regulated banking sector and the shadow banking system. However, an in-depth assessment of the activities of shadow banking and of the interconnection with the regulated banking system would require further improvements in the availability of data and other sources of information.
JEL Code
G01 : Financial Economics→General→Financial Crises
G15 : Financial Economics→General Financial Markets→International Financial Markets
G21 : Financial Economics→Financial Institutions and Services→Banks, Depository Institutions, Micro Finance Institutions, Mortgages
G28 : Financial Economics→Financial Institutions and Services→Government Policy and Regulation
23 January 2017
The policy focus on excessive leverage in the euro area has raised interest in developing comprehensive analytical approaches to better understand the interrelationship between leverage and deleveraging processes across economic agents. In particular, the interplay between government debt and private leverage is attracting increasing attention in the current context of simultaneous deleveraging adjustments. However, analyses of the subject are generally partial in that they fail to take into account feedback effects on balance sheet positions across economic agents. This paper attempts to clarify these cross-agent interlinkages by examining concepts, relationships and restrictions taken from the national accounts framework. Hence, the paper presents a mechanism that captures how increased leverage in certain agents contributes, ceteris paribus, to a reduction in leverage in the rest of the economy. The novelty of the underlying framework for leverage behaviour is that it takes the financial assets held by agents into consideration.
JEL Code
E01 : Macroeconomics and Monetary Economics→General→Measurement and Data on National Income and Product Accounts and Wealth, Environmental Accounts
E62 : Macroeconomics and Monetary Economics→Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook→Fiscal Policy
H3 : Public Economics→Fiscal Policies and Behavior of Economic Agents
H6 : Public Economics→National Budget, Deficit, and Debt