Shadow banking development and its impact on banking system liquidity management

Abstract

In the article the theoretical and practical approaches to determining the definition of "shadow banking" are considered. Te peculiarities of its functioning in developed countries and in Ukraine are analysed. The purpose of the article is to study the theoretical and methodological approaches to defining the essence of shadow banking, to analyse the foreign and domestic features of its functioning and to develop the theoretical and practical recommendations to reduce the negative impact of the latter on the liquidity of the banking system and the effectiveness of monetary policy. Among the methods that we have used in the article are as the following: the empirical approach is used to determine the definition of "shadow banking";the comparative, statistical and functional analysis method of shadow banks is applied; the systemic approach to study ways to minimize the negative effects of shadow banking for the banking system and economy in general is used. The formation of the author’s own vision of the essence of shadow banking which is based on institutional and instrumental approaches has become the main result of the study. We have defined and characterized the negative effects of its presence for banking system liquidity and monetary policy of central banks. A number of recommendations to reduce the negative effects of shadow banks to the banking system and economy in general has been worked out.