In the recent case, as we all know, a great deal of financial activity moved outside the regulatory net, via the so-called shadow banking system which enabled the creation of a whole array of off-balance sheet vehicles, for example SPVs and conduits, to circumvent capital requirements.
6  BIS Review 107/2010  Graph 1  The increasing size and complexity of the system and the rise of non-bank financial institutions made the regulatory architecture increasingly less effective. By the late 1970s, the philosophical tide was turning against intervention as efficiency costs became more apparent – a trend not confined to finance.