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Keywords:

  • financial crisis;
  • leverage;
  • liquidity creation;
  • non-bank financial sector
  • E44;
  • E51;
  • G20

This paper explains how modern developments in lending and liquidity management using short-term secured lending contributed to the process of financial sector expansion prior to the financial crisis and its subsequent unwinding. It focuses upon the role of the non-regulated financial sector, and aims to assist readers to understand the answer to the commonly asked question: where has all the money gone? It draws some lessons and policy implications and identifies a number of regulatory issues emerging as the subject for debate.