Andrea Resti Gets a European Parliament GrantFOR A STUDY ON SHADOW BANKING REGULATION, TO BE CONCLUDED BY MAY 2021
Andrea Resti, Associate Professor at Bocconi Department of Finance, is the winner of a European Parliament tender, reserved for invited scholars, to write a study on the regulation of shadow banking, i.e. non-bank financial intermediation. Professor Resti will make use of the contribution by other scholars, including Marco Onado, Senior Professor at Bocconi.
According to Professor Resti, the term “shadow banking” only means that these activities are not under the spotlight of banking regulation, but it has not a negative connotation.
His first concern is that shadow banking is extremely procyclical, with a tendency to booms-and-busts that must be addressed.
Furthermore, traditional banking and shadow banking are dangerously interconnected: roughly 8% of traditional bank liabilities are provided by non-bank financial institutions, and around the same share of bank assets are invested in securities originated by shadow banks. “In case of shadow banking turmoil, this can be a big problem, if we consider that traditional banks’ equity is around 3-4% of their assets. We have to insulate the banking system from shocks coming from shadow banking.”
Finally, shadow banking can be an engine for growth, thanks to fintech services or project financing, just to mention a few. “Regulation must be carefully crafted in order to avoid unintended consequences without slashing this potential for growth,” concludes Professor Resti.
The study is to be submitted to the European Parliament by May 2021.
by Fabio Todesco