The Global Crisis highlighted how linkages between banks and shadow banking entities can lead to the amplification of shocks across borders and sectors, prompting policymakers to seek to improve the monitoring framework for assessing the interconnectedness of the shadow banking system. This column documents the cross-sector and cross-border exposures of EU banks to globally domiciled shadow banking entities. Among the findings are that 60% of these exposures are to shadow banking entities domiciled outside the EU and hence outside its supervisory powers, and that approximately 65% of the exposures are to non-money market fund investment funds, finance companies, and securitisation entities.
The full article is available at http://voxeu.org/article/interconnectedness-between-eu-banks-and-shadow-banking-entities