The global financial crisis (as well as the European sovereign debt crisis) has led to a substantial redesign of rules and institutions - aiming in particular at underwriting financial stability. At the same time, the crisis generated a renewed interest in properly appraising systemic financial...

At the heart of both the modern shadow banking system and the 19th century banking system described by Walter Bagehot is the wholesale money market, with the central bank providing a liquidity backstop. We characterize shadow banking as “money market funding of capital market lending” and...