The Global Pandemic and Run on Shadow Banks
Abstract: In March, the global coronavirus pandemic led to a period of financial stress in which credit conditions tightened at an unprecedented pace. Elements of this stress period can be explained as a classic run on “shadow banks”—nonbank financial institutions that fund long-term assets with short-term debt. Although timely Federal Reserve interventions restored some calm to markets, shadow banks remain vulnerable to future runs because they lack the safeguards available to regulated depository institutions.
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Description: Full text
Provider: Federal Reserve Bank of Kansas City
Part of Series: Economic Bulletin
Issue: May 11, 2020