Dr. Jim Stewart:

Yes, there are concerns with shadow banking. There is no doubt that shadow banking is a huge area of risk to the global economy. It is not so much to the Irish economy because most of the shadow banking activities relate to other countries. It may well be the case, as in the financial sector, that what happens in Ireland has more effect in other countries than within Ireland. The growth of shadow banking and its unregulated nature lead to risks. Shadow banking is a huge area and there is no doubt that some parts of shadow banking are very high risk, while others are of less risk.

The problem is if there is a chain of lending, failure in one area can lead to failures in other areas as happened in the case of Lehman Brothers and other cases. An era of rising interest rates and credit shortages could pose risks to shadow banking and the sorts of funds that are being raised by shadow banking and provided to other sectors.