Largest Shadow Banking market in world
Q. Of the following countries, which country has the largest shadow banking market in world?- Published on 15 Feb 17
USA has the largest shadow banking market in the world.
Shadow banking system refers to the financial intermediaries involved in facilitating the creation of credit across the global financial system but whose members are not subject to regulatory oversight.
The shadow banking system also refers to unregulated activities by regulated institutions.
Examples of intermediaries not subject to regulation include hedge funds, unlisted derivatives and other unlisted instruments, while examples of unregulated activities by regulated institutions include credit default swaps.
The shadow banking system has escaped regulation primarily because it does not accept traditional bank deposits.
Thus, many of the institutions and instruments have been able to employ higher market, credit and liquidity risks, and do not have capital requirements commensurate with those risks.