Shadow banking and non-bank financial intermediation

Non-bank financial intermediation (NBFI) has undergone substantial growth in recent years, driven by financial and technological innovation, asset accumulation, macroeconomic changes, and demographic trends, but also the effects of regulatory reforms on banks’ ability to provide traditional intermediation services, from lending to deposit-taking, and the payment system. This chapter reviews the growth of NBFI from different perspectives. First, definitions based on activities, entities, and infrastructures are considered. Non-bank financial intermediaries (NBFIs) are different from banks but are also closely linked to banks’ activities and organizational structures. The role of NBFIs in the financial system is examined, focusing on their role in lending markets. Finally, we consider the risks and vulnerabilities of the sector, and potential spill-over effects, as evidenced by recent episodes of turbulence.