The “shadow banking system”, which will be defined in more detail in the report, can broadly be described as “credit intermediation involving entities and activities outside the regular banking system”. Intermediating credit through non-bank channels can have advantages. The term “shadow banking system” started to be used widely at the onset of the recent financial crisis. The emergence of the term reflected a recognition of the increased importance of entities and activities structured outside the regular banking system that perform bank-like functions. The crisis demonstrated many ways in which shadow banking is interrelated with the regular banking system and can have an impact on global financial stability. This paper sets out the current thinking of the task force on: 1) what is meant by the "shadow banking system", potential approaches for monitoring the shadow banking system; and possible regulatory measures to address systemic risk and regulatory arbitrage concerns posed by the shadow banking system. Based on the work of the task force, the FSB will consider initial recommendations at its July Plenary meeting and submit recommendations to the G20 in autumn.

The FSB welcomes comments from the public on this note. Comments should be submitted by 16 May 2011 by e-mail ([email protected]) or post (Secretariat of the Financial Stability Board, c/o Bank for International Settlements, CH-4002, Basel, Switzerland).