Major organizations that carry out banking activities, but are not banks, may become so important to the financial system that they need to be regulated like traditional banks, a European Central Bank governing council member said on Saturday. Financial regulators are seeking to shine a light on so-called "shadow banking", a 24-trillion-euro ($33 trillion) industry in Europe - half the world's total - that comprises money market funds, some hedge funds, and firms involved in securities lending and repurchase markets. Speaking at the Finnish Social Forum, Erkki Liikanen said there was a risk that tighter banking regulation in the aftermath of the global financial crisis could lead to growth in unregulated shadow banking. "Such proactive measures as applying systemically-important financial institution definition and extending that regulation and supervision also to the shadow banking sector could be taken if necessary," Liikanen said in the text of a speech.
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