Shadow Banking Entities

Abstract

AbstractThis chapter discusses the international governance of shadow banking entities, notably, money market funds (MMFs), hedge funds, and other investment funds. Post-crisis international standards for all these funds lacked precision, stringency, and consistency. Three factors account for this outcome. First, interstate conflict was the main hindrance to stricter rules on hedge funds and MMFs. Second, there was epistemic disagreement and bureaucratic turf fighting between prudential regulators and securities regulators concerning the risks posed by investment funds involved in asset management, and how to tackle these risks. Prudential regulators took the lead in the policy debate, especially on Globally Systemically Important Institutions (G-SIFIs), with very limited success. Third, there was lobbying cum venue shopping by the financial industry, which skilfully played sectoral regulators against each other at the domestic and international levels.