What institutions are examples of "shadow banking"?

Question

I often hear the term shadow banking tossed around when discussing the United States and Chinese economies. What exactly is shadow banking and could you give examples of some specific companies that act as "shadow banks"? I have been told that in China, shadow banking refers to informal loans that are not written up in any documentation. Is this correct?

Answer 1

Shadow banking refers to entities that are not regulated because they do not take deposits. Some examples include mutual funds, hedge funds, securitized portfolios, private equity funds, as well as peer-to-peer lenders like the Lending Club and SoFi. Some of the products include repurchase agreements, derivatives, and credit-default swaps. Regulated institutions like banks also may engage in shadow banking with parts of their operations that are not subject to regulation, typically through their subsidiaries or in parts of the bank holding company. I think when you talk about Chinese shadow banking they are not referring to undocumented loans but things like wealth management products and trusts which are much larger in volume.