Warehouse lending is a financial mechanism that serves as a bridge between traditional regulated banking systems and the shadow financial system, allowing banks to lend funds to bridging lenders who then provide short-term financing to borrowers, creating interconnected risk exposure between these two financial sectors.
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How Banks Hide Their Biggest Risks #money #finance #economyAdded:
Now, here's the bit that makes your head spin. And this is crucial for understanding how Barclays, a massive regulated high street bank, ended up with around 500 million pounds exposed to a Mayfair bridging lender. The mechanism is called warehouse lending, and it is the bridge, yes, the irony's not lost on me, between the traditional banking system and the shadow system.
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