The Risks Behind the Numbers
While such aggregate numbers make for good headlines, they are not particularly helpful for assessing the risks associated with shadow banking. There is much more to the story.
An implication of the term “shadow banking” is that diverse and distinct forms of nonbank credit can be grouped together under the same heading and thought of in the same way. In reality, each form of credit exhibits a dramatically different risk profile. Pointing to the riskiness of one form of shadow banking (usually trust products or wealth management products) and then citing the overall amount of shadow banking gives a misleading perception of the magnitude of the risks.