What is a shadow banking system?

The shadow banking system is a term for the collection of non-bank financial intermediaries (NBFIs) that provide services similar to traditional commercial banks but outside normal banking regulations.

Are regulated banks the largest shadow banks?

One former banking regulator has said that regulated banking organizations are the largest shadow banks and that shadow banking activities within the regulated banking system were responsible for the severity of the financial crisis. ^ Zoltan Pozsar, Tobias Adrian, Adam Ashcraft, and Hayley Boesky (December 1, 2013).

Why are NBFCs called shadow banks?

NBFCs are known as shadow banks because they are not regulated as strictly as traditional banks and operate similarly to banks but without being subject to the same level of regulatory oversight. As a result, it can make them more vulnerable to financial risk and instability. This has been a guide to what is Shadow Banking.

How has the shadow banking sector changed after the financial crisis?

In the decade following the financial crisis of 2007-08, the shadow banking sector expanded, playing a key role in meeting the credit demand unmet by traditional banks. This growth came with a higher level of scrutiny from regulators, because of the fallout from the financial crisis.