Question

What makes a shadow bank different from a depository bank? a. Shadow banks do not engage in maturity transformation. b. Shadow banks do not make loans. c. Shadow banks do not accept deposits. d. Shadow banks are not vulnerable to bank runs. e. Shadow banks are government institutions.

Name: Problem 1, Chapter 12: Macroeconomics in Modules
Uploaded: 2019-10-06T21:37:48-08:00
Duration: 1 min 37 s
Channel: Xiaomin Bian
Description: What makes a shadow bank different from a depository bank? a. Shadow banks do not engage in maturity transformation. b. Shadow banks do not make loans. c. Shadow banks do not accept deposits. d. Shadow banks are not vulnerable to bank runs. e. Shadow banks are government institutions.

   What makes a shadow bank different from a depository bank?
a. Shadow banks do not engage in maturity transformation.
b. Shadow banks do not make loans.
c. Shadow banks do not accept deposits.
d. Shadow banks are not vulnerable to bank runs.
e. Shadow banks are government institutions.

Macroeconomics in Modules

Paul Krugman, Robin… 3rd Edition

Chapter 12, Problem 1

Instant Answer

Solved by Expert Xiaomin Bian

10/06/2019

Step 1

Shadow banks are financial intermediaries that engage in similar activities to traditional banks but do not accept deposits. They include entities like investment banks, hedge funds, and money market funds. Show more…

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What makes a shadow bank different from a depository bank? a. Shadow banks do not engage in maturity transformation. b. Shadow banks do not make loans. c. Shadow banks do not accept deposits. d. Shadow banks are not vulnerable to bank runs. e. Shadow banks are government institutions.

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Key Concepts

Shadow Banking

Shadow banking refers to financial activities and intermediaries that operate outside the conventional banking system, meaning they do not accept traditional deposits. These institutions perform many of the functions of banks, such as providing credit and liquidity, but they are less regulated and do not have access to central bank support or deposit insurance, which can affect their risk profiles and stability.

Depository Banking

Depository banking involves institutions that accept customer deposits and use these funds to provide loans and other financial services. These banks engage in maturity transformation by using short-term deposits to fund longer-term loans, and they operate under stringent regulatory oversight, including systems like deposit insurance to protect customers from bank runs.

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