Shadow banking now under scrutiny in Portugal

Along with the perils posed by the “deep web”, the world has woken up to the risks posed by “shadow banking” – a murky corner of the financial sector that operates with less restrictions than those imposed on the world’s banks. The problem, say regulators, is that just as banks can fail, so too could shadow banks. Thus countries, including Portugal, have been conducting studies into the sector.

“Mapping shadows” is how Bloomberg financial website terms the investigations.

Concentrating on Portugal, negóciosonline reports that the working group set up by the national council of financial supervisors has been concentrating on evaluating risks and attempting to mitigate them.

Made up of representatives from the Bank of Portugal, bank regulator CMVM and the institute of insurers, it has been looking into various hedge funds, money-market mutual funds and brokerages and has concluded “that practically all the intermediaries considered are interconnected with the banking system”.

More worrying perhaps is the fact that “the crushing majority of investment funds”, as well as capital risk and others “are actually held by Portuguese banks.

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