Bill 118 s 3538, also known as the Close the Shadow Banking Loophole Act, is a piece of legislation introduced in the US Congress aimed at addressing issues related to shadow banking. Shadow banking refers to financial activities conducted by non-bank financial institutions that are not subject to the same regulations as traditional banks.
The main purpose of this bill is to close loopholes in the current regulatory framework that allow shadow banking entities to engage in risky practices without proper oversight. The bill seeks to enhance transparency and accountability in the shadow banking sector by requiring these entities to adhere to stricter reporting requirements and regulatory standards.
Specifically, the Close the Shadow Banking Loophole Act would require shadow banking entities to register with the Securities and Exchange Commission (SEC) and provide detailed information about their activities, assets, and liabilities. This increased transparency is intended to help regulators identify and address potential risks to the financial system posed by shadow banking activities.
Additionally, the bill includes provisions to strengthen the oversight of money market funds, which are a key component of the shadow banking sector. Money market funds are investment vehicles that invest in short-term, low-risk securities and are often used by investors as a cash equivalent. The bill aims to reduce the systemic risk posed by money market funds by requiring them to maintain a minimum level of capital and liquidity.
Overall, the Close the Shadow Banking Loophole Act represents a bipartisan effort to address the regulatory gaps that have allowed shadow banking entities to operate outside the traditional banking system. By increasing transparency and accountability in the shadow banking sector, the bill aims to enhance the stability and resilience of the financial system.