what are known as shadow banks. but that term is a little misleading because there ’ s nothing “ shadowy ” about shadow banking entities. just like banks in the traditional sense, they are part of the financial system and provide important services – funding investment and helping investors to diversify risk more effectively. but just like the traditional banking system, shadow banks can also be a source of risk. areas of the shadow banking sector which had contributed to the financial crisis are currently dwindling in importance – securitisation, to name but one. that holds true not only for germany but worldwide, too. but at the same time, there are other areas of the shadow banking sector which are coming to the fore. mutual funds are just one example. this shows that shadow banks are not operating in a “ regulatory vacuum ” because mutual funds are subject to the capital investment code ( kapitalanlagegesetzbuch ). valuation effects are one of the key factors driving up the volume of assets managed by these funds. inflows of capital prompted by changes in the regulatory setting in other areas and portfolio reallocations tend to be less significant. bis central bankers ’ speeches just like any other intermediaries, shadow banking entities can be systemically important on account of their size, interconnectedness or a co - movement of risks. the key metrics do not currently indicate an increase in risk. first, maturity and liquidity transformation in the mutual fund sector are stable for the most part. second, leverage through the use of debt tends to be on the low side. fund investments by insurers and pension funds are geared more to the long term, bringing a degree of stability to the mutual fund sector. third, concentration levels within the sector are mounting, however. this means that the size of some individual mutual funds could make them systemically important. it is not least for that reason that we will continue to keep a close eye on the shadow banking sector and potential risks in the future. 6. macroprudential instruments financial sector regulation has been improved since the financial crisis. one of the main thrusts of these new regulatory packages was to introduce instruments that curb the risk caused by the size and concentration of institutions – that is to say, instruments which tackle the too - bigto - fail problem head on. the recovery and resolution act for banks came into force in germany at the beginning of this year. starting in january 2016, systemically important banks will need to build up additional capital

a loss only if the counterparty and the pledged collateral default simultaneously. as limiting credit risk has become a fundamental concern during the crisis, importance is increasingly being attached to the liquidity of collateral markets and the associated collateral pricing. the growing share of secured trading via electronic trading platforms can be explained mainly by the increased turnover in the secured segment. these platforms offer clearing services through central counterparties ( ccps ). ccps limit counterparty credit risk and mitigate information asymmetry within the market. as the ccp guarantees the transaction and defines quality standards for both, participants and the accepted collateral, information about the individual counterparties becomes less important. by acting as an intermediary between the trading partners, the ccp enables them to trade anonymously on these platforms. this helped stressed market participants from peripheral countries to access the collateralised money market throughout the crisis. in spite of these positive effects, the increasing importance of ccps harbours the risk of contagion effects. the default of one of bis central bankers ’ speeches these central and highly connected interbank participants might have serious impacts on markets. the uncertainty involved with transactions between banks of different countries has another consequence. the eurosystem has become the most important counterparty in the euro money market. before the first tensions were felt, the eurosystem generally ensured broadly balanced liquidity conditions. credit institutions on aggregate were allotted as much liquidity as was needed under given autonomous factors. with the full allotment policy, liquidity provision increased sharply. as a consequence of very low market rates relative to the deposit facility and amid concerns over the credit quality of counterparties, a clear preference emerged for storing liquidity on central bank accounts rather than lending it in the interbank market. in short, liquidity flows between banks were much smaller than before the crisis. the eurosystem ’ s central intermediary role became even more evident when it started to supply long - term liquidity via one - year and three - year longer - term refinancing operations ( ltros ). the three - year ltros were introduced to support bank lending. furthermore, they eased tensions in the sovereign bond markets of the peripheral countries, as banks intensified their government bond purchases. however, we have observed a strong preference on the part of banks to buy bonds issued by their home countries. this amplified the interdependence of the banking sector and the domestic sovereign bond market in certain euro - area countries and aggravated the existing geographical segment