Dividing (and Conquering?) Shadows: FSB and US Approaches to Shadow Banking at the Dawn of 2014

This article addresses how the approaches of the FSB and the US to regulating “shadow banking” entities and activities has evolved and the consequences of their strategies. We note that the concept of “shadow banking activities” has, at both the global and national level, focused to an increasing extent on the risks associated with short-term financing. However, the regulatory approach with respect to shadow banking entities has diverged at the global and national level. We conclude that activities-based reforms are a more promising means of addressing shadow banking, and, where entity-specific reforms are necessary, the US would benefit from the FSB’s sector-based approach as well as the FSB’s policy of relying on existing regulatory bodies with relevant sector-expertise.