Private Banking Versus Shadow Banking Essay

1338 Words Dec 11th, 2016 6 Pages
Private Banking Versus Shadow Banking
There are two types of banking secrecy systems Switzerland takes part in, shadow banking and private banking. The shadow banking system points to the financial intermediaries associated with enabling the creation of credit across the world financial system whose members are not subject to regulatory oversight. Any unregulated activity by regulated institutions is also termed shadow banking (International Monetary Fund, 2014). Private banking, however, is individualized banking and financial services that are customarily given to banks that service wealthy high net individual clients (Moosa, 2015). This paper explains shadow banking in general but specifically shadow banking in Switzerland. In the first section, shadow banking is defined and primary features of shadow banking are identified. The remainder of the paper addresses similarities between shadow and private banking systems, in particular, the benefits and risks of shadow banking, the global financial crisis of 2007-2012 a key reason shadow banking should be regulated, and future policies for Switzerland’s shadow banking industry. Shadow Banking Versus Private Banking
Shadow banks mainly lack business licenses; they do not take deposits as the depository bank would and consequently are not subject to regulation as depository banks. In Switzerland, private banks also point to bank secrecy and gaining profits meticulously through assets allocation or by hiding assets from taxing…

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