Indirect regulation is aimed at the regular banking system and tries to keep a check on its links to the shadow banking system. Direct regulation, on the other hand, takes direct aim at shadow banking participants and activities. In terms of indirect regulation, some progress has been made in the reforms to the Basel framework.
The industry had been already considering this issue over the past couple of years but the changes induced by COVID-19 will make this more urgent. I expect that there will be action on this issue more quickly now.