Shadow banking in the shadow of the law or within a shadowy legal framework?: The case of the European Union

Speaker: Dr Evgenia Ralli, Lecturer in Financial Law and Regulation

Abstract

The definition, regulation, and institutionalisation of shadow banking have been a matter of debate worldwide. In the EU, its indirect and partial regulation and institutionalisation influenced by international policy developments and disregarding European specificities have been strongly criticised. By examining and comparing the legally binding definitions of the shadow banking entity and traditional bank, namely credit institution, the indirect, partial, and cherry-picking legal institutionalisation of shadow banking at the EU level is confirmed. However, the particularities of the European traditional and shadow banking sector and their regulation have not been fully dismissed but instead partially taken into consideration and addressed. This approach results in legal incoherence, inconsistency, and over- and underlaps. Instead of one EU TBS and one EU SBS, it is argued that multiple national TBSs and SBSs are over- and underlapping with each other and with the EU ones incoherently and inconsistently. Within the context of the EU, the SBS, the TBS and in general ‘banking activities’ do not exist in the shadow of the EU legal framework but instead, they are placed within and promoted by a shadowy EU legal framework. [1]

[1] This research outcome is based largely on the findings of my unpublished PhD thesis submitted and defended at the European University Institute (EUI) in Mai 2022. During my PhD study, I have been awarded grants from the German Academic Exchange Service (DAAD) and the EUI.

 

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