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    Appendix 6: The Spectrum of Shadow Banks Within A Spectrum of Shadow Credit Intermediation

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    The document outlines different types of shadow banks along a spectrum of credit intermediation activities from least to most risky. It provides an illustrative table listing various shadow banks that performed the seven steps of shadow credit intermediation, with each step involving increasing amounts of credit, maturity, and liquidity transformation. The table shows the different asset mixes, funding strategies, and degrees of capital/leverage employed by each shadow bank.

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    Appendix 6: The Spectrum of Shadow Banks Within A Spectrum of Shadow Credit Intermediation

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    ank333
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    The document outlines different types of shadow banks along a spectrum of credit intermediation activities from least to most risky. It provides an illustrative table listing various shadow banks that performed the seven steps of shadow credit intermediation, with each step involving increasing amounts of credit, maturity, and liquidity transformation. The table shows the different asset mixes, funding strategies, and degrees of capital/leverage employed by each shadow bank.

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    The document outlines different types of shadow banks along a spectrum of credit intermediation activities from least to most risky. It provides an illustrative table listing various shadow banks that performed the seven steps of shadow credit intermediation, with each step involving increasing amounts of credit, maturity, and liquidity transformation. The table shows the different asset mixes, funding strategies, and degrees of capital/leverage employed by each shadow bank.

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    Appendix 6: The Spectrum of Shadow Banks Within A Spectrum of Shadow Credit Intermediation

    Uploaded by

    ank333
    The document outlines different types of shadow banks along a spectrum of credit intermediation activities from least to most risky. It provides an illustrative table listing various shadow banks that performed the seven steps of shadow credit intermediation, with each step involving increasing amounts of credit, maturity, and liquidity transformation. The table shows the different asset mixes, funding strategies, and degrees of capital/leverage employed by each shadow bank.

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    Appendix 6: The Spectrum of Shadow Banks within a Spectrum of Shadow Credit Intermediation

    Shadow banks are best thought along a spectrum. Each of the seven steps involved in the shadow credit intermediation process were performed by many different types of shadow banks, with varying asset mixes, funding strategies, amounts of capital and degrees of leverage. The list of balance sheets below are an illustrative example of this. Thus, the shadow credit intermediation process was supported by various forms of equity of various degrees of strength (each denoted with a red cell): as such, equity came in the form of common equity, overcollateralization (O/C), haircuts, equity tranches and capital notes. Wholesale funding providers (money market mutual funds, securities lenders) were the only actors involved in the shadow credit intermediation process without any form of capital supporting their activities. Having numerous types of shadow banks under each functional step of the shadow credit intermediation process means that each funcional step can be performed many different ways. Depending on the asset mix and funding strategy employed, different shadow banks performing the same functions in the system conducted different amounts of credit, maturiy and liquidity transformation. Shadow banks are listed vertically, top-down, in increasing order of riskiness.

    " Asset Flows" Step 1 Credit, Maturity and Liquidity Transformation Step 2 Credit, Maturity and Liquidity Transformation Step 3 Credit Transformation (Blending) Step 4 Credit, Maturity and Liquidity Transformation Step 5 Credit Transformation (Blending) Step 6 Credit, Maturity and Liquidity Transformation Step 7 Maturity and Liquidity Transformation

    Loan Originaton Loans Loans

    Loan Warehousing Loans

    ABS Issuance ABS

    ABS Warehousing ABS

    ABS CDO Issuance ABS CDO

    ABS Intermediation ABCP

    Wholesale Funding $1 NAV

    CP

    ABCP

    Repo

    ABCP, repo " Funding Flows"

    CP, repo

    ABCP, repo

    Captive Finance Co. (Investment Grade Parent) CP Personal MTNs and Business Bonds Loans Equity

    Single-Seller Conduit (FHC Sponsored) Credit Card Loans O/C

    ABCP

    Static Pools (Amortizing Structures) AAA to Auto BBB Loans Tranches Equity

    H ybrid Conduit (Independent) Loans and ABS O/C

    ABCP

    " Static" ABS CDO (Maturity Matched) AAA BBB to ABS BBB Tranches Tranches (static) Equity

    LPFCs (Independent) ABS Bonds* ABCP MTNs CNs *Banks, finance cos., sovereigns

    2(a)-7 MMMFs (FHC Sponsored) CP ABCP $1 NAVs RRs A1 etc. No Equity!

    Increasingly risky activities due to greater amounts of credi and maturity transformation conducted

    Standalone Finance Co. (Diversified Lender) CP Personal MTNs and Bonds Business Loans Equity

    Multi-Seller Conduit (FHC Sponsored) Various Loans O/C

    ABCP

    Master Trusts (Revolving Structures) AAA Credit to Card BBB Loans Tranches Equity* *Seller's interest

    Repo/TRS Conduit (Independent) Reverse Repos O/C

    SIV-L ite* (Maturity Mismatched ABS CDO) BBB ABS Tranches (static) ABCP

    SIVs (FHC Sponsored) ABCP ABS MTNs CDOs Bonds CNs *Banks, finance cos., sovereigns ABS

    ABCP

    MTNs CNs *Market value structures

    2(a)-7 MMMFs (Independent) CP ABCP $1 NAVs RRs A1 etc. No Equity!

    Captive Finance Co. ("Junk" Parent) Personal and Business Loans ABCP ABS Equity

    Multi-Seller Conduit (Independent) Various Loans O/C

    ABCP

    Wrapped Static Pools (Amortizing Structures) BBB Subprime Tranche Auto in AAA Loans "Wrap" Equity

    Banks' Trading Books (...) Loans and ABS Repos Haircut

    " Revolving" ABS CDO (Maturity Matched) AAA BBB to ABS BBB Tranches Tranches (dynamic) Equity

    Securities Arbitrage Conduit (Landesbank Sponsored) ABS ABCP ABS CDOs O/C Credit H edge Fund (DBD Sponsored) ABS ABS CDOs Repos Haircut

    Enhanced Cash Fund (Independent) CP ABCP $1 NAVs RRs A1 MTNs No Equity! Securities L ender (Insurance Co. Sponsored) ABCP RRs $1 NAVs A2-A3 MTNs No Equity!

    Standalone Finance Co. (Monoline Lender) Home Equity Loans ABCP ABS Equity

    Single-Seller Conduit (Finance Company Sponsored) Home Equity Loans O/C

    " H EL" RMBS Home Equity Loans AAA to BBB Tranches Equity

    DBDs Trading Books Loans and ABS

    Synthetic ABS CDO Unfunded CDS Protection Collateral Super Seniors AAA AA-BBB Equity

    SLN

    Repos Haircut

    Source: Shadow Banking (Pozsar, Adrian, Ashcraft, Boesky (2010))

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