Question

How is the shadow banking system the same as the traditional banking system?A) It intermediates the flow of funds between net savers and net borrows.B) It serves as a middle man.C) The complete credit intermediation is performed through a series of steps involving many nonbank financial service firms.D) The complete credit intermediation is performed by a single bank.

Answer 1

The correct answer is letter "C": The complete credit intermediation is performed through a series of steps involving many nonbank financial service firms.

Step-by-step explanation:

The Shadow Banking System is composed of entities that either intermediate operations through banks or regulated financial institutions in a conventional way. Hedge funds, special purpose entities, structured investment vehicles, and mutual funds are among the types of organizations that make up the shadow banking system.

Shadow banks make most of their money by acting as intermediaries between large borrowers and large borrowers. They earn their income from interest rate spreads and the fees they charge for their services.