THE SHADOW BANKING SYSTEM ROLE IN TRIGGERING CRISIS AND CONTAGION EXTENSION

PETRIA Nicolae, Lucian Blaga University of Sibiu

Abstract:
U.S. financial crisis triggered in the middle of 2007 set out in particular the interconnection between the compartments of the financial market, between the financial institution that operates on this market. The high interdependence of the participants on the market generates growth and dynamic premises of the processes of financial contagion in case of expressing the phenomena of financial panic, which makes stress and the financial crises to sustain each other. The recent crises has highlighted the failure of the economy based on exacerbated credit, on the business model of investment banks, on economy which promoted the increasing number of market participants and leverage. It promoted also the increasing role of the so called “parallel banking system” or “shadow banking system” in triggering the crises and in the extension of financial contagion. Our study has an objective to define and explain the concept of “shadow banking system”, to high-lighten the features and particularities of this system, to show which was the role of this system when the crises emerged and the systemic risk grew within the financial system. The study also has as an objective to present the contribution of the shadow banking system in initiating and amplifying the phenomena of financial contagion and tries to identify some solutions to prevent the negative effects of the action of shadow banking system.

Keywords: financial crisis, shadow banking system, contagion

JEL Classification:

Volume: 60.1, Issue: 1

Pages: 22 - 58

Publication date: , 2012

Download the article: http://economice.ulbsibiu.ro/revista.economica/archive/RE%201-60-2012.pdf

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