In particular, we are concerned about the implications of these  BIS central bankers’ speeches  1  activities for global liquidity. If shadow banks are involved in a large share of the activities of the financial sector, it is more likely that in periods of stress liquidity dries up very quickly in certain markets leading to sudden stops in funding.
Also, shadow banking extends the intermediation chain and increases the associated contagion risks. There are various forms of interplay between the regulated banking system and the shadow banking system resulting in a substantial amplification of systemic risk. One of the elements for the US market, has been the “run on repos” of shadow banking entities that were funded using asset-backed-securities as collateral.