In this article we analyze the Hungarian shadow banking system. We point out that
the Hungarian shadow banking system is not only much less developed than that of the
EU's developed countries, but also structurally different. A further specific feature
of the Hungarian financial system is what we call the secondary shadow banking system,
through which foreign shadow banking funds do not finance the domestic banking system
directly, but through foreign interbank funds and related cross currency basis swaps.
The aim of our analysis is to explore the reasons for these specificities, to analyze
the risks of the Hungarian shadow banking, and secondary shadow banking systems, and
to show that the interconnectedness between banking and shadow banking may not only
occur through direct exposure, but also indirectly through the presence of secondary
shadow banking.
