Working Paper: NBER ID: w23280
Authors: Jorge Abad; Marco Derrico; Neill Killeen; Vera Luz; Tuomas Peltonen; Richard Portes; Teresa Urbano
Abstract: This paper provides a unique snapshot of the exposures of EU banks to shadow banking entities within the global financial system. Drawing on a rich and novel dataset, the paper documents the cross-sector and cross-border linkages and considers which are the most relevant for systemic risk monitoring. From a macroprudential perspective, the identification of potential feedback and contagion channels arising from the linkages of banks and shadow banking entities is particularly challenging when shadow banking entities are domiciled in different jurisdictions. The analysis shows that many of the EU banks’ exposures are towards non-EU entities, particularly US-domiciled shadow banking entities. At the individual level, banks’ exposures are diversified although this diversification leads to high overlap across different types of shadow banking entities.
Keywords: shadow banking; EU banks; systemic risk; macroprudential policy
JEL Codes: F65; G21; G23
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| geographical domicile of shadow banking entities (F65) | exposure of EU banks (F65) |
| diversified exposures (G19) | systemic risk due to common sources of shocks (F65) |
| banks' support (G21) | potential systemic risks in the banking sector (F65) |