The Financial Stability Board (FSB) has warned about the risks of shadow banking due to high leverage and lack of transparency, posing threats to global financial stability. The FSB highlights the potential for position liquidation and counterparty distress in the industry, impacting large banks that provide leverage to shadow lenders. Recent examples of shadow banking’s impact include the ‘dash for cash’ in March 2020 and Archegos’ default in March 2021. US banks have significant exposure to shadow lenders, raising concerns about potential crises affecting the banking sector. Due diligence is crucial to ensure the safety of bank deposits amid growing risks in the banking environment.

Read more at Investing.com: Could Shadow Banking Cause Another Crisis for Big Banks?