Shadow banking

An enigmatic realm of financial intermediation, shadow banking comprises non-bank institutions that engage in credit creation and lending activities, operating outside the traditional regulatory framework and offering a diverse range of financial services, often with an air of mystery and intrigue.

Example

Shadow banking entities can include hedge funds, money market funds, and peer-to-peer lending platforms, among others. For instance, a peer-to-peer lending platform might facilitate loans between individuals or businesses, bypassing traditional banks and providing an alternative source of financing. While shadow banking can contribute to financial innovation and inclusion, it may also pose risks to the stability of the financial system due to its lack of regulatory oversight and transparency.