Speech by Fed Governor Tarullo on shadow banking and systemic risk regulation
Governor Daniel K. Tarullo At the Americans for Financial Reform and Economic Policy Institute Conference, Washington, D.C. November 22, 2013. Shadow Banking and Systemic Risk Regulation.
“As illustrated, quite literally, by a chart that New York Fed staff produced a few years ago
, the term “shadow banking system” encompasses a wide variety of institutions that engage in credit intermediation and maturity transformation outside the insured depository system. In my remarks today, I want to concentrate on short-term wholesale funding and, especially, the pre-crisis explosion in the creation of assets that were thought to be “cash equivalents.” Such assets were held by a range of highly risk-averse investors, who were in many cases not fully cognizant that the “cash equivalents” in their portfolios were liabilities of shadow banks–the institutions depicted in the memorable graphic.”