Over past decades, a significant share of global credit activities has shifted outside the regulated banking system into the Shadow Banking Sector, also known as Non-Bank Financial Intermediation (NBFI).
The Non-Bank Credit Architecture
The shadow banking perimeter includes investment funds, money market funds, hedge funds, and special purpose vehicles that engage in maturity transformation without direct access to central bank liquidity facilities:
[Retail/Corporate Depositor] <--- Places Cash Assets ---> [Money Market Fund Pool]
                                                                    |
                                                                    v
[Funds Corporate Activity] <--- Purchases Commercial Paper <--------+

Because these entities lack regulatory backstops, they are highly vulnerable to sudden runs. This risk requires central banks to monitor shadow banking networks to prevent non-bank failures from spilling over into the primary banking system.
 
PreviousNext