Thus, we have to turn our heads, take a close look at the shadow banking sector, understand what is going on there and ultimately control the systemic risks that we have identified. As a first step it is necessary to define the shadow banking sector. Here, a broad approach is warranted for two reasons.
First, the broader the regulatory view, the less room for regulatory arbitrage remains – provided regulation is internationally coordinated. Second, only a broad view allows the regulators to keep track of the constant evolution of the shadow banking sector. For the same reasons, it is imperative to define the shadow banking sector not in terms of entities but in terms of activities.