Last month, the Federal Reserve Bank of Philadelphia published a staff paper entitled “Shadow Banking and the Crisis of 2007-08.” Citing the work of economists Gary Gorton and Andrew Metrick, the paper discusses how the “Great Recession” can be viewed as a “typical” banking crisis, albeit one that originated in the shadow banking system. Having accepted this premise, the author concludes that shadow banks “are as vulnerable to panics as traditional banks because they are subject to similar risks.” The paper also notes that some economists apportion blame for the financial crisis on the asset-backed commercial paper market.

The Financial Times reported that the Federal Reserve Board is studying how best to limit possible investor runs on bond funds, which it believes are a form of shadow banking. One solution being vetted involves the imposition of exit fees.

In a speech before the Conference of State Banking Supervisors, U.S. Comptroller of the Currency Thomas J. Curry urged state banking commissioners to make oversight of shadow banks a high priority.

Bloomberg reported that the Federal Home Loan Banks are voluntarily adopting a three-month moratorium on the admission of insurers owned by real estate investment trusts (“REITs”). The move follows Federal Housing Finance Agency concerns that the REITs’ use of captive insurers to gain access to FHLB financing is at the very least creating an impression of impropriety and at worse, creating instability.

Last Thursday, the National Credit Union Administration (“NCUA”) Board approved a proposed rule allowing qualified federal credit unions to securitize loans they have originated. The NCUA Board also approved a proposed rule which creates safe-harbor protection for certain securitized assets and protects investors in cases of conservatorship or liquidation. NCUA Press Release.

Across the Atlantic, Mark Carney, Governor of the Bank of England, listed the steps the Bank of England will take to reform that country’s shadow banking system. They include the implementation of standards to limit large exposures of traditional banks to shadow banks and making money market funds less susceptible to runs through minimum liquid asset requirements and by establishing the ability for funds to use temporary suspensions of withdrawals and redemptions in kind. To address the misalignment of incentives created by unsound securitization structures, the development of minimum margin requirements is also underway. View Mark Carney’s entire article here.

And as noted last week, the Bank of England, in conjunction with the European Central Bank, issued a discussion paper on the development of a well-functioning securitization market. The discussion paper considers a range of options that authorities could support to revitalize the securitization market. These include developing high-level principles for “qualifying securitizations” and harmonizing securitization standards across the European Union.