Shadow banking faces reform

The shadow banking sector continues to pose risks to the UK’s financial stability, Lord Turner, chairman of the Financial Services Authority warned yesterday, as he insisted a fresh approach to its regulation was necessary. Turner, speaking to the CASS Business school, said it was urgent that the shadow sector, such as money market funds aimed at retail investors, were reformed in the same way as “normal banks”.

The sprawling array of non-banks that extend credit and provide other bank-like services are “not something parallel to and separate from the core banking system, but deeply intertwined with it ... We need to ensure that our regulatory response appropriately covers shadow banking as well as banks,” Lord Turner said.