Shadow Banks

Finally, we will look at the shadow banking system.

If shadow banking seems too dubious for you, this industry is also called marketplace lending.

It is a banking network that is not bound by the same rules that other big banks must follow.

The Financial Stability Board (FSB) reported that Shadow Banking has an estimated $75 trillion in assets.

Essentially, shadow banking is unregulated credit intermediation.

These institutions take money from savings accounts and depositors and lend it to borrowers.

These transactions are known as shadow transactions only because they are not regulated and are not subject to the same scrutiny as the same transactions at other banks.

Shadow banks offer the following services:

• Lines of Credit: You can open lines of credit with shadow banks. This credit is not secured by the central bank’s treasury, but by funds borrowed from savings accounts and investors.
• Loans: Loans can be taken from shadow banks. The source of money is the same.
• Again, shadow banks are not technically banks, but they can offer some of the same services as real banks, but without the careful government oversight to which they are subjected.

Many people do transactions through shadow banks, but not everyone likes it because it can often result in a legitimate target on your back.