In the aftermath of the Lehman crisis, payouts (i.e., taxpayer bailouts) in various forms were provided by governments to a variety of financial institutions and markets that were outside the regulatory perimeter - the "shadow" banking system. Although recent regulatory proposals attempt to reduce these "puts", we provide examples from non-banking activities within a bank, money market funds, Triparty repo, OTC derivatives market, collateral with central banks, and issuance of floating rate notes etc., that these risks remain. We suggest that a regulatory environment where puts are not ambiguous will likely lower the cost of bail-outs after a crisis.
International Monetary Fund; September 2012
- ISBN: 9781475555707
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- Title: "Puts" in the Shadow
Series: IMF Working Papers
- Author: Manmohan Singh
Imprint: INTERNATIONAL MONETARY FUND