Okay. Well, first, for some quick context, most of the focus of regulatory reform has been on the regulated banking sector. The other half, though, of the financial system is the so-called shadow banking system. Our objective here is to turn that from something that exists in the shadows to something that has full daylight, from a pejorative term—shadow banking—to something that has a more neutral term: market-based finance. The way to do that is to address five aspects. Let me unify and comment on them.
What matters for financial system stability, for what happens outside the regulated sector, is the provision of credit where there are maturity transformations. You borrow short and lend long. It's that combination of maturity transformation and credit intermediation where you create risk that could potentially impact the whole system. With regard to the non-bank ABCP in Canada, people borrowed short, they lent long, and that's fundamentally what created the risk.
The first of the five areas we're focused on at the Financial Stability Board is the links to the regulated sector, the links to the banks, whether through back-up liquidity lines or other arrangements.
Second is how money market funds are structured, particularly in the United States. More broadly it's this structure where you have a guaranteed net asset value in a money market fund. It looks like a bank. You put your money in the fund and you have what's perceived as a guaranteed net asset value. It's upon the realization that the guarantee has no safety net, no capital underneath it, that you get a run on the money funds, which is what we saw in the U.S. There will be a report and recommendations coming out on that very shortly.
Third is issues around securitization markets.
Fourth is other shadow banking entities, which can include hedge funds, as an example. There are a variety of measures there.
Finally, and very importantly, there is the structure of what's called the repo market, the repurchase market, which is one of the core funding markets for institutions. Basically, it's asset-based short-term lending. The fact is, the way those markets operated was exposed during the crisis. Bear Stearns and Lehman showed you can have huge impacts across the system.
I would note that in Canada we've made tremendous progress in the launch of a central counter-party for repo, which is going to take out a lot of those risks.