How does shadow banking work in practice?

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The traditional banking system, which we deal with every day, has a series of regulations, imposed not only by local governments, but also through international conventions, which order and monitor the remittance of funds between countries. In Brazil, for example, the Central Bank is responsible for regulating and supervising the activities of financial institutions operating in the country.

Among many of these regulatory parameters is the requirement honduras phone number list a bank receive deposits and have the margin to guarantee all of its financial commitments, including the withdrawal of these deposited funds. This allows you to leave your money deposited and not have to worry about rushing to withdraw it if something bad happens in the market.

In addition, banks must also monitor and alert tax and monetary authorities about their customers' transactions, including the origin of the money received.

None of this happens with a financial institution that operates in the shadows. Without regulation, they can take on businesses that no supervised financial institution would take on. This includes, as we have already mentioned, high leverage and high-risk operations.