What is shadow banking Essay Example | Topics and Well Written Essays - 2750 words - 1

What is shadow banking - Essay Example services offered, explains the pros and cons and shows the connection between this new mode of banking and the traditional method (Poszars & manmohan, 2011). The main objective of this study is to explore the concept of shadow banking and show this, i just read your profile and i want to be your pal from Kenya he main underlying ideas behind it. The research focuses on the impacts of this banking and the role of shadow banks in modern contemporary living. It identifies the connection and the place of shadow banks in the future in relation to traditional forms of banks. Banking for several years has followed the traditional banking system which despite the various issues in management and operation has flourished in the industry. Proper lending modes, rates of interests and principles governing loans and investments have been major contests between the banking sectors, the government and the people. Some claim that the rates are high, while others fail to obtain enough amounts of funds for their needs. The government on the other side plays a big role in maintaining a balance in balance of payments which is influenced by the rates of exchange in banks. The introduction of shadow banks has led to a large controversy in the industry based on the foundation of their operations and at the same time offered solutions to the many issues regarding operations in the banking unit (Adrian & Shin, 2009). This is a network of financial institutions such as structured investment vehicles, hedge-funds, conduits, money-market funds, investment banks and non-bank financial institutions whose members are not subject to regulatory limits and laws. They facilitate credit creation in a global financial market whose banks are non-depository. These banks do not accept traditional bank deposits and their activities such as credit default swaps are not regulated. As a result most of the instruments are able to fetch higher market as well as credit and liquidity risks despite lacking