Fintech Takes S8 E2: Bank Nerd Corner: What Are Shadow Banks?
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Jul 17, 2024 Assistant professor Todd Phillips discusses shadow banking, risks, Synapse bankruptcy, bank supervision challenges, regulator/bank dynamics, and CFPB efficiency in an engaging breakdown.
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Goldsmith Romero's Background
- Christy Goldsmith Romero, nominated to lead the FDIC, has a strong background in regulation.
- As CFTC commissioner, she oversaw bank swap dealers and, as SIGTARP inspector general, held bankers accountable for financial crisis misconduct.
Defining Shadow Banks
- Shadow banks perform maturity transformation but aren't banks, including money transmitters, stablecoin issuers, and crypto banks.
- They take demand deposits and use them for long-term loans or investments, posing risks to consumers.
Risk in Maturity Transformation
- Maturity transformation, inherent in shadow banking, always carries risk, even with seemingly safe investments.
- Circle's experience with Silicon Valley Bank illustrates this, as their "safe" FDIC-insured deposits became inaccessible during the bank's failure.