Fade the Cryptic Mask of Shadow Banking

Due to the financial crisis's incredible influence on the global economy and normal individuals, the shadow banking system fades its mystery mask slowly. To some extent, the shadow banking system really accelerated the financial crisis processing. So what is a rational attitude to the shadow banking system? Should central banks or treasury adopt more regulation on monitoring shadow banking and what is the proper regulate steps?

Firstly, let's  take a little time on denote the definition of the shadow banking system, shadow banking  also can be defined as shadow financial system or shadow banking system normally. This definition was proposed by Paul Mcculley, who is the executive director of Pacific Investment Management Company. After Paul Mcculley's naming, shadow banking was received by public in past few years. Then, the Financial Stability Board (FSB) defines shadow banking as “credit inter-mediation involving entities and activities outside the regular banking system”, but other authors give complementary definitions that emphasize different aspects of shadow banking. 

For example: 

1. Adrian and Ashcraft (2012) say it is “a web of specialized financial institutions that channel funding from savers to investors through a range of securitization and secured funding techniques”. 
2.  Poszar, Adrian, Ashcraft and Boesky (2012) put special emphasis on the similitudes and differences between traditional banking and shadow banking explaining that they carry out similar functions but that “shadow banks [unlike] traditional banks lack of access to public sources of liquidity such as the Federal Reserve’s discount window, or public sources of insurance such as Federal Deposit Insurance” (reference here).

From the definition from FSB, we can explicitly find the character of shadow banking is out of regular banking system, which means it is not under the traditional banking regulation. The dramatic increase of the scale of  shadow banking was caused by incredibly attractive profit based on lack of regulation. The shadow banking system has played an irreplaceable role in the financial market.
However, comparing with the concept of traditional banking, the shadow banking is still mystery for the most individuals. Here is a video explaining what is shadow banking. 

Then, does shadow banking really murder healthy economy and what is the magnitude of the influence caused by shadow banking? Next post could explain these issues to some extent.