Reuters writes "FSA wants radical rules for shadow banks". They say, "Regulators won't fully understand the complexity of "shadow banks" and should therefore opt for radical rule changes, Britain's Financial Services Authority (FSA) said on Wednesday. Policymakers say the opaqueness of the $60 trillion (38.27 trillion pounds) shadow banking system -- a web that includes money market funds, securities lending and repos -- which operates alongside mainstream lenders contributed to the financial crisis. Leaders of the world's top 20 economies (G20) have called on their regulatory task force, the Financial Stability Board (FSB), to come up with draft rules by the end of this year.... Responses could include higher capital levels in the banking system, ensuring that lenders hold bail-inable [sic] debt, and capital requirements such as minimum initial margins on individual contracts. The task of regulating shadow banks is challenging, not least in defining what is shadow banking and exactly how it has contributed to financial instability in the past, he said. `Shadow banking is not "something parallel to and separate from the core banking system, but deeply intertwined with it"."
