Promontory Founder and CEO Gene Ludwig wrote in the March 16, 2016, American Banker about the need to regulate the shadow banking sector. He argued that shadow banks’ high-risk operations threaten the stability of the entire financial system, and called upon U.S. policymakers to address the risks posed by nonbanks through regulatory equivalency.
“Even modestly sized shadow banking operations threaten the entire financial system. These companies are inextricably linked with regulated financial institutions because they perform similar functions and are interconnected — mostly systemically as counterparties in securities and funding markets. A collapse in the shadow banking sector cannot be contained to the shadow banking sector.”
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