A checkered landscape

SPECIAL REPORT TD Economics August 6, 2015 A CHECKERED LANDSCAPE: A GLOBAL VIEW OF THE RISK OF SHADOW BANKING Highlights •. In this report, we provide an overview of the shadow banking systems in North America and Europe in the hopes of providing a better understanding of the risk these systems represent. [...] In a changing regulatory environment that is mostly focused on the stability of the traditional banks, the concern is whether or not shadow banks will become as large as they once were through another unsustainable build-up of poor-quality assets that led to the 2008-09 financial crisis. [...] The other must The shadow banking system is similar to the traditional be directed at the so-called ‘shadow banking’ system…” banking system in that the range of activities the two engage Efforts made since 2008 to regulate the financial system in closely mirror one another. [...] Chart 1 shows that the outstanding mortgages held 4,000 Total financial assets, USD billions on the balance sheets of finance companies (both captive 3,500 and non-captive) nearly quintupled from US$130 billion to nearly $600 billion in the 8 years leading up to the housing 3,000 downturn, but fell precipitously in the wake of the crash. [...] In the U. S. and Canada, these entities are only only as they were partly being used to fund the origination partly included to the extent that they transact in the funding and securitization of poor-quality assets.