Shadow Banking and Shadow banks?
Shadow banks are which perform some "bank-like" functions, mostly around lending, without the regulatory frameworks of "real" banks.
The classic example might be an investment bank like the demised . Lehman would act as a conduit for a loan between an institutional investor like a pension fund and a corporation, for example by repackaging loans and selling them on.
Other examples of shadow institutions would be , structured investment vehicles, or special purpose entities.
A "shadow" bank:
- Operates like a bank: it takes deposits (investments), makes loans (investments), and profits from the spread (difference) between what it pays depositors and the it is paid by its loans/investments.
- Is not regulated by the standard commercial bank regulation system.
- Is not insured by the usual system, i.e. the , and is thus subject to " " if confidence falters or fails.