Shadow banking has become an important, and rapidly growing,Shadow banking activities consist of credit, maturity,and liquidity transformation that take place without direct and explicit access to public sources of liquidity or credit backstops.In the shadow banking system, credit is intermediatedthrough a wide range of securitization and secured fundingtechniques, including asset-backed commercial paper (CP),asset-backed securities (ABS), collateralized debt obligations(CDOs), and repurchase agreements (repos).

The shadow banking system is organized around securitizationand wholesale funding. Loans, leases, and mortgages aresecuritized and thus become tradable instruments. Funding isconducted in capital markets through instruments such ascommercial paper and repos. Savers hold money marketbalances instead of deposits with banks