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Department of Agricultural, Environmental, and Development Economics


Why Regulate Shadow Banking?

Outlines the current approaches to regulating commercial banking, such as Basel III, noting that they are not applicable to the shadow banking sector where the financial crisis was at its most intense. In particular, the run on the repurchase market is described, where investors such as money market mutual funds became less willing to lend to shadow banks as they became uncertain about the quality of asset-baked securities containing sub-prime mortgages.

Publication type: 
Policy brief
Date published: 
Wednesday, December 1, 2010