Banks are vulnerable because of their own shadow banking products and by the products they back that are issued by other entities. In December, several WMPs failed to make payments to investors, sparking small protests and bringing the faults of WMPs into the spotlight. WMPs can be akin to Ponzi schemes, in that sales of new products allow the banks to pay returns on existing products. Many WMPs also involve fund pooling, which helps banks hide risks and provide the promised payouts for WMPs, but carries significant risks in that it is backed by bonds that may not be mature or may have declined in value, creating a liquidity risk.
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