Wednesday, September 29, 2021

The $52 Trillion Shadow Banks That Supercharged The Commodity Boom — Alex Kimani

With a dearth in lending, trade finance is becoming an increasingly important alternative credit investment strategy where a growing variety of shadow banks and investment funds are becoming "the new banks".

Shadow banks–a term the industry generally resents–consists of financial intermediaries who facilitate the creation of credit across the global financial system. The shadow banking system can also refer to unregulated activities by regulated institutions, including hedge funds, unlisted derivatives, and even credit default swaps. One big distinction between shadow banks vs. traditional lenders: Shadow bankers are mostly exempt from regulatory oversight because these institutions do not accept traditional deposits. Naturally, they also charge much higher rates than traditional lenders–sometimes twice as high.

These companies have been seeing a surge in business during the ongoing commodity boom as banks turn their backs on smaller and higher-risk traders....

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