Regulating Shadow and New Financial Tools

In this study, 1) a comparison between traditional and shadow banking systems is presented, 2) the effectiveness and risk of shadow banking is investigated and 3) the system of shadow banking is examined for increasing its effectiveness and decreasing risk. The fact that the concept of shadow banking is not defined adequately, naturally delimits the analysis. We attempt to provide an accurate definition by identifying its general domain and its main features. Through concentration on these principles, our analysis is more conceptual rather than applied. Our goal is not to find the responsible official who must regulate shadow banking. In this article it is stated that traditional legal agents tend to segregate in order to focus better on their subject of interest. For instance, regulations specific to some financial institutes such as banks or specific to some financial products such as the assets converted to securities or its derivatives which focus on its specific subject have impact on the affectivity. Since shadow banking is a shortcut of groups, its regulation may require more attempt or at least better coordination of agencies regarding the financial laws about the current situation. Among this, various types of institutions in shadow banking system are defined in brief so that the relationship between these groups will be investigated in future research, if any.

shadow banking, traditional banking, systematic risk, affectivity, securities