nonbank intermediation requires a balancing of the resulting increase in socially beneficial credit, capital, or savings options against any associated increase in risks to the safety and stability of the financial system as a whole. the chief relevant factors to consider include the extent of reliance on maturity or liquidity transformation, the creation of cash equivalent assets, the use of leverage, and the degree of interconnection with the traditional banking sector. when growth in nonbank intermediation reflects a migration of traditional banking activities to less - regulated entities, a number of similar considerations are relevant to an evaluation of the costs and benefits of the migration and the potential need for a regulatory response. here, where the activity is probably quite bank - like, i am going to revert to the use of the term shadow bank. first, to what extent does the activity, as practiced by shadow banks, entail reliance on leverage or on maturity or liquidity transformation that could lead to a bank - like creditor run dynamic? bank regulation is primarily aimed at preventing the occurrence of such destabilizing runs or minimizing their ill effects, and so the need for bank - like regulation is greater in the presence of material run risk. second, are banks still informally or indirectly at risk despite the migration to nonbank entities? this could be the case if banks sponsor the shadow banks and implicitly or explicitly provide them with a liquidity backstop or credit support, and it would call for greater regulatory attention either to the shadow banks conducting the activity or to the banks ’ connection with those shadow banks. third, is the activity at issue primarily migrating out of the most systemic banks – global systemically important banking organizations ( gsibs ) – or smaller banks? migration of activity out of gsibs might on net be beneficial for financial stability because it would leave the gsibs less systemic, even if the activity migrates to less - regulated shadow banks, though i would caution that an especially careful analysis would be needed before reaching this conclusion. in this regard, i would note that one way to limit the growth of shadow banking that simply arbitrages bank regulation is to make sure that the regulated sector itself is not unnecessarily burdened. this aim lies behind our efforts to tailor banking regulation by reference to the risks posed to the economy and the financial system by banks of different sizes, scopes, and business activities. in addition, it suggests a couple of additional considerations for evaluating specific forms of

times, they were seen as comparable to demand deposits created by the traditional banking sector. thus, what we might refer to as the prototypical form of shadow banking presented the kind of risk associated with traditional banking prior to the creation of deposit insurance – that of destabilizing short - term creditor runs that lead to defaults and asset fire sales. bank sponsorship contributed to the illusion that the shadow banks ’ short - term liabilities were virtually as good as cash. large banks also relied on short - term wholesale funding provided by the shadow banking sector as a source of cheap financing. then, questions arose about the quality of the mortgage loans and other assets underlying the liabilities of sivs and asset - backed commercial paper conduits and, simultaneously, about the continued willingness and capacity of their sponsors to support them. suddenly, asset - backed commercial paper was no longer seen as a cash equivalent, and a run ensued. large investment banks also experienced dramatic runs on their short - term, secured wholesale funding. another powerful run occurred, this time on money market mutual funds, after lehman brothers ’ shadow banking activities caused it to fail and the reserve primary fund broke the buck. as noted earlier, some key elements of pre - crisis shadow banking such as sivs have vanished, and some key actors of that earlier period have been brought within the bounds of prudential regulation. today, the shadow banking sector is smaller and the traditional banking sector is more resilient. nonetheless, abundant global liquidity continues to seek out safe assets, and some financial market participants will continue to accept maturity and liquidity mismatches in order to earn incrementally higher yields. the risks associated with short - term wholesale funding in particular have more receded than disappeared. accordingly, the prototype of the precarious shadow banking model can generate new variants that should command regulatory attention. before returning to this issue, though, i want to speak more directly to why and how we should analyze the risks and benefits associated with specific forms of nonbank financial intermediation, rather than make regulatory decisions based upon the fact that a particular form of intermediation bears some resemblance to the borrowing or lending activities traditionally associated with commercial banks. analyzing nonbank intermediation switching from a focus on “ shadow banking ” to a consideration of the varieties of nonbank intermediation reinforces the importance of assessing specific risks rather than merely categorizing activities as either shadow banking or something else. in this way, the potential