Shadow Banking: Risks and Opportunities

Banks perform intermediation as well as transformation functions. They pool funds, bridge maturity discrepancies and diversify risk. However, they also have functional substitutes, "non-bank banks" or "shadow banks", that serve identical purposes and compete in the same lines of business. Over the last two decades, the role of the shadow banking sector increased substantially. When thinking about efficiency and stability of financial markets, it has become imperative to account for the risks and opportunities in banking beyond the traditional banking sector.

Keywords: capital markets union, hedge funds, high frequency trading, MiFID, OTC trading

Research Papers on Shadow Banking

Title Author/s Research Area Source Published Keywords

Spoilt for Choice: Order Routing Decisions in Fragmented Equity Markets

Peter Gomber, Satchit Sagade, Erik Theissen, Moritz Christian Weber, Christian Westheide Financial Markets, Systemic Risk Lab SAFE Working Paper No. 143 2016 Dark Trading, Fragmentation, Anonymity, Immediacy

Freedom of Contract and Financial Stability through the lens of the Legal Theory of Finance

Brigitte Haar Corporate Finance SAFE Working Paper No. 141 2016 law and finance, financial stability, financial contracts, structured finance, asset-backed securities, pari passu clauses, collective action clauses, otc derivatives markets, central counter parties, Basel III, Coco bonds, trust law, China

Competition Between Equity Markets: A Review of the Consolidation Versus Fragmentation Debate

Peter Gomber, Satchit Sagade, Erik Theissen, Moritz Christian Weber, Christian Westheide Financial Markets forthcoming in the Journal of Economic Surveys, 2016 2016 Competition, Fragmentation, Market Structure, Liquidity, Price Discovery

How Special Are They? Targeting Systemic Risk by Regulating Shadow Banks

Tobias Tröger Financial Institutions Cambridge University Press, 2016 2016 shadow banking, regulatory arbitrage, prudential supervision

The State of Play in European Over-the-Counter Equities Trading

Peter Gomber, Satchit Sagade, Erik Theissen, Moritz Christian Weber, Christian Westheide Financial Markets Journal of Trading, 2015 2015

MiFID: Eine systematische Analyse der Zielerreichung

Peter Gomber, Benedikt Jaeger Financial Markets Zeitschrift für Bankrecht und Bankwirtschaft, 2014 2014

Spillover Effects among Financial Institutions: A State-Dependent Sensitivity Value-at-Risk Approach

Zeno Adams, Roland Füss, Reint Gropp Systemic Risk Lab, Financial Institutions Journal of Financial and Quantitative Analysis, 2014 2014 Risk spillovers, state-dependent sensitivity value-at-risk (SDSVaR), quantile regression, financial institutions, hedge funds

Policy Papers on Shadow Banking

Year Title Author/s Research Area Keywords Year
February 2017

Skin-in-the-Game in ABS Transactions: A Critical Review of Policy Options

Jan Pieter Krahnen, Christian Wilde Financial Markets Structured finance, ABS, STS (simple, transparent, and standardized securitizations), regulation, retention, capital, Dodd-Frank Act 2017-02
September 2016

“Predatory” Margins and the Regulation and Supervision of Central Counterparty Clearing Houses (CCPs)

Jan Pieter Krahnen, Loriana Pelizzon Financial Markets central counterparties, CCP, derivatives, financial market regulation, financial market supervision 2016-09
April 2016

Euro area shadow banking activities in a low-interest-rate environment: a flow-of-funds perspective

Günter Beck, Hans-Helmut Kotz Financial Institutions, Macro Finance Non-bank financial intermediation, shadow banking, financial stability, systemic risk, financial regulation, low interest rate environment 2016-04
April 2016

Lost in translation? ECB’s monetary impulses and financial intermediaries’ responses

Günter Beck, Hans-Helmut Kotz, Natalia Zabelina Financial Institutions, Macro Finance Non-bank financial intermediation, interest-rate channel, credit channel, risk-taking channel of monetary policy, market-based financial intermediation, monetary transmission mechanism, waterbed effect 2016-04
February 2016

The German Equity Trading Landscape

Peter Gomber Financial Markets MiFID II, MiFIR, equity trading, electronic trading, cash equity markets 2016-02
May 2015

Comments on the EU Commission’s Capital Markets Union Project

Volker Brühl, Helmut Gründl, Andreas Hackethal, Hans-Helmut Kotz, Jan Pieter Krahnen, Tobias Tröger Financial Markets Capital Markets Union, functional finance approach, level playing field, financial services 2015-05
September 2015

Euro Area Macro-Financial Stability: A Flow-of-Funds Perspective

Günter Beck, Hans-Helmut Kotz, Natalia Zabelina Financial Institutions, Macro Finance Bank and non-bank financial intermediation, shadow banking, financial stability, systemic risk, financial regulation 2015-09
April 2014

How Important Are Hedge Funds in a Crisis?

Reint Gropp Financial Institutions systemic risk analysis, statistical risk measurement, spillover effects 2014-04
May 2014

MiFID: Eine systematische Analyse der Zielerreichung

Peter Gomber, Benedikt Jaeger Financial Markets MiFID, Wettbewerb, Integration, Transparenz, Integrität 2014-05
September 2014

Neuordnung der Finanzmärkte in Europa durch MiFID II/MiFIR

Peter Gomber, Frank Nassauer Financial Markets MiFID II, MiFIR, Derivatehandel, Hochfrequenzhandel 2014-09
February 2015

The Regulation of Repo Markets: Incorporating Public Interest through a Stronger Role of Civil Society

Matthias Thiemann Financial Markets Repo Markets, Shadow Banking, Non-governmental Organizations 2015-02
February 2012

Recommendations by the Issing Commission – Memo for the G-20 November 2011 summit in Cannes

Otmar Issing, Jan Pieter Krahnen, Klaus Regling, William White Financial Institutions shadow banking, systemic risk analysis, regulatory arbitrage 2012-02
September 2011

High-Frequency-Trading: Zwischen Nutzeffekten und Risiken

Peter Gomber Financial Markets Wertpapiermärkte, High Frequency Trading, Regulierung 2011-09
April 2011

High Frequency Trading

Björn Arndt, Peter Gomber, Marco Lutat, Tim Uhle Financial Markets algorithmic trading, high-frequency trading, regulation 2011-04
December 2010

Competition among electronic markets and market quality

Peter Gomber, Markus Gsell, Marco Lutat Financial Markets MiFID, market fragmentation,liquidity 2010-12
November 2010

MiFID - Spirit and Reality of a European Financial Markets Directive

Peter Gomber, Axel Pierron Financial Markets MiFID, regulation, securities trading 2010-11

Research Projects on Shadow Banking

Category Project Researcher Project Duration Keywords Project ID Publication Count
Financial Markets, Systemic Risk Lab

An examination of the strategic behavior of high-frequency traders (HFTs)

Loriana Pelizzon, Ryan Riordan, Satchit Sagade, Marti Subrahmanyam, Jun Uno, Christian Westheide 2016 21620 1
Financial Institutions

Shadow banking with an implicit government put

Matthias Thiemann 2015 21181 1
Financial Markets

Management of Market Risks: Regulation and Coordination of Volatility Interruptions in Europe

Benjamin Clapham, Peter Gomber, Jascha-Alexander Koch, Sven Panz 2015 Circuit Breaker, Volatility Interruption, Volatility, Liquidity, Market Design, Coordination, Market Fragmentation, Volume Migration 21490 1
Financial Markets, Systemic Risk Lab

Strategic behavior of High Frequency Traders during the market pre-opening period

Mario Bellia, Loriana Pelizzon, Marti Subrahmanyam, Jun Uno, Darya Yuferova 2014 High Frequency Traders, Order Submission, Order Cancellation, Pre-Opening, Price Discovery, Liquidity Provision 12150 1
Financial Markets, Systemic Risk Lab

Limits to arbitrage in sovereign bonds: price and liquidity discovery in high frequency quote driven markets

Mario Bellia, Loriana Pelizzon, Max Riedel, Marti Subrahmanyam, Davide Tomio, Jun Uno 2014 Sovereign bonds, Liquidity, futures markets, ECB interventions, futures-bond basis, arbitrage 12126 1
Financial Institutions, Macro Finance

Examining the Role of the Shadow Banking System and Economic Heterogeneity for Financial and Monetary Stability in the Euro Area

Günter Beck, Hans-Helmut Kotz, Natalia Zabelina 2014 14206 1
Household Finance

Household Finance: Legal and institutional framework

Kai Jungbluth, Kosmas Kaprinis, Thomas Kelm, Katja Langenbucher, Tobias Tröger 2013 Household finance, investor protection, MiFid 11329 1
Financial Markets, Transparency Lab, Systemic Risk Lab

Determinants of OTC Trading Volume

Peter Gomber, Ilya Gvozdevskiy, Satchit Sagade, Erik Theissen, Moritz Christian Weber, Christian Westheide 2013 OTC Trading, Dark Pools, MiFID 11424 1

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