The shadow banking system refers to

1. Non-bank financial firms that provide legal advice on mergers.

2. Non-bank financial firms that acted as stock brokers by buying and selling stocks in an effort to make a profit.

3. Non-bank financial firms that purchased government bonds.

4. The unregulated non-bank financial firms engaged in borrowing from investors and lending to households and firms.

Question

Business

Charles Griffin

12 October, 20:59

The shadow banking system refers to

1. Non-bank financial firms that provide legal advice on mergers.

2. Non-bank financial firms that acted as stock brokers by buying and selling stocks in an effort to make a profit.

3. Non-bank financial firms that purchased government bonds.

4. The unregulated non-bank financial firms engaged in borrowing from investors and lending to households and firms.

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Answers (1)

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Ashley Benjamin · Answer 1

All of them are correct:

1. Non-bank financial firms that provide legal advice on mergers. 2. Non-bank financial firms that acted as stock brokers by buying and selling stocks in an effort to make a profit. 3. Non-bank financial firms that purchased government bonds. 4. The unregulated non-bank financial firms engaged in borrowing from investors and lending to households and firms.

Explanation:

The shadow banking system includes financial institutions that do not receive deposits from regular clients (e. g. no checking accounts, no savings accounts), like investment banks, hedge funds, money market funds, payday loans, mortgage lenders, private equity, and other non bank financial institutions.

They act as financial intermediaries that facilitate credits but their activities are not regulated because they do not take money deposits from regular clients.