Shadow banking: A geographical interpretation

Abstract

Shadow banking is a peculiar kind of business organization, or better a set of institutions, products and markets, closely intertwined. Its purpose is to run credit activities partly or mainly outside the regulated banking system. This chapter analyses the subject from a structural point of view, within the wider context of the emerging globalized economy. A comparison with the ‘classic’ banking system is proposed, drawing a parallel with the evolution experienced by other economic sectors. Two main issues are considered: (1) the system was already well known but neither assessed nor regulated; and (2) we are not facing a parallel market, but a set of activities which do not develop under one roof, but are fragmented into a variety of companies. All this stresses the scarce visibility of the sector, hence the name shadow. As for official banking, the relationship is both competitive and cooperative, so that the anomaly is to be credited to the entire credit/finance sector. The influence of this process on the spatial distribution of real-economy activities is also discussed.