It will be essential to disaggregate all the activities that might be characterized as shadow banking in order to regulate those that pose risks to the financial system while not unduly burdening forms of credit extension that may more or less benignly help meet the savings and investment needs of households and businesses.
This task is perhaps summed up by the fact that activities which in one context are called “shadow banking” are in other contexts called “market-based financing." One might fairly characterize the current regulatory approach to shadow banking as one that examines, in turn, significant forms of credit intermediation outside the banking system and determines whether some type of prudential regulation is needed.