Shadow banking: Money market’s odd relationship with the law

After several years of reforms aimed at putting the financial system on a sounder footing, together with the ensuing fatigue, could the intriguing concept of ‘shadow banking’, adopted by the Financial Stability Board (FSB) and the European Commission, herald a second period of fundamental reforms? This depends on whether the concept is associated to new, exotic breeds of financial intermediaries (in which case reforms will not amount to much) or seen as a symptom of broader changes at the core of financial systems, both local and global, which would require deeper, more comprehensive reforms. This article discusses the nature of the problem and its implications.