However, large commercial banks also developed close ties with the shadow banking system by having hedge funds under their umbrellas or by creating special purpose companies off their balance sheets to transfer related operations. It reached the point where the performance of these companies began to impact the soundness of major commercial banks themselves.
In addition, the shadow banking system also had greater influence on the global financial system. When it began to face liquidity shortfalls, it accelerated the sale of its assets, bringing a downward spiral to asset prices, which in turn became one of the factors in systemic risk. The current financial crisis indicates that some form of regulation is necessary for the shadow banking system.