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Shadow Banking

Shadow Banking

    small business lending survey
    Small banks received a 75 percent lender satisfaction score in the 2015 Small Business Credit Survey. Online lenders? Only 15 percent.
    Shadow banking widens access to credit and better rewards savers, but its underground nature can cause serious systemic risks.

    A significant amount of credit is available through the traditional banking system that matches borrowers and lenders. There is also a parallel system, often referred to as "shadow banking," that performs a similar function but through specialized financial institutions. This shadow system operates outside many of the rules and regulations placed on traditional banks, hence the "shadow" designation. To better understand shadow banking, it is helpful to first understand borrowing, lending, and credit in general.

    Regional Economist article

    To those who don't know, the term "shadow banking" probably has a negative connotation. This primer draws parallels between what has been termed the shadow banking sector and the traditional banking sector—showing that they are similar in many ways.