Chapter 1 - What is Shadow Banking? This treatise is based on a number of current researchers on shadow banking, I acknowledge their influence on my thinking and thank them, Melanie Fien, Zoltan Pozsar, Adrian Ashcraft The term “shadow banking” is the one used by banking regulators, the media and by academics, especially when providing explanations for the 2007-2008 financial crisis. It has become a rallying point for international reform efforts targeting unregulated non-bank financial activities that have the potential to destabilize the global financial system. in another form it should remain an integral part of the financial ecosystem in the days to come3. This treatise challenges the labeling of shadow banks and will attempt to demonstrate that shadow banking can be seen as a parallel system to the traditional banking model rather than being a replacement. Therefore this improper characterization of this very important sector is largely incorrect and a correct and unbiased view will result in the ability of regulators to propose a rational framework for a financial system that will not collapse again. This raises the very important question: what exactly is shadow banking? ?. It originally originated from economist Paul McCulley's observations as a description of a large segment of financial intermediation that is routed off the balance sheets of regulated commercial banks and similar depository institutions. This routing of information off balance sheets is the main reason why financial regulators and economists have called this sector that. The spotlight is on Sh...... middle of paper ......sorry to avoid culpability for the crisis and thus created a false narrative that has not presented a concrete basis for building a resilient financial framework in the future. This is largely because such claims are actually at odds with the facts and suggest that regulators still do not understand the events that led to the financial crisis. Shadow banks are at the heart of the global market-based financial intermediation system, leading maturity, liquidity and credit transformation without explicit public sector guarantees or access to liquidity18. A commonly overlooked fact is that most non-bank financial intermediation predates the financial crisis by decades, and as a result, many of the largest shadow banking institutions are established institutions with close ties to the traditional banking system..