Bank of England Governor Mark Carney wrote recently in the Financial Times, "The need to focus a light on shadow banking is nigh". His comments were mentioned during this week's Money Fund Symposium and careful observers noted that a European "buffer" was not included in his remarks. He said, "As progress has been made in reforming the global banking  system and as risk appetite returns to financial markets, wider attention has begun to focus on shadow banking.... In the run-up to the crisis, opacity in shadow banking fed an increase in leverage and a reliance on short-term wholesale funding.... [R]eforms are in train to make the institutions and markets at the heart of the shadow banking system more resilient. Money market funds are being made less susceptible to runs through minimum liquid asset requirements and by establishing an ability for funds to use, for example, temporary suspensions of withdrawals and redemptions in kind. The misalignment of incentives created by unsound securitisation structures is being corrected. And minimum margin requirements are being developed to reduce the cycle of excessive borrowing in economic booms that cannot be sustained when liquidity dissipates in core fixed-income markets."

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