Identifying shadow banking in Vietnam

Abstract

The definition of shadow banking was first mentioned at the Economic Forum hosted by Federal Reserve (Fed) (Jack Hole Wyoing -2007). Shadow banking is a form of credit, implemented by financial organizations, which simultaneously exists with traditional form of credit in commercial banking system, yet is out of Central Bank’s supervision (FSB,2013). Green Paper- Shadow Banking, European Commission analyzed the importance of shadow banking in providing alternative investment tools and a useful source of financing complementing traditional fund-raising channels. However, shadow banking may bring about significant drawbacks to the whole financial system of various countries. Research Department of the United States Congress (2009) considered shadow banking system as one of the fundamental causes that lead to the financial crisis in the period of 2007-2009. Therefore, the effect that shadow banking has on the economy has always been a controversial issue. In Vietnam, shadow banking has already derived and developed under various forms. Although its impact on the economy is not exactly obvious, specifically identifying these activities is still needed to have an objective assessment on this issue.