Shadow banking is a financial system created by high-leverage, non-deposit-taking intermediaries outside of traditional banking activities. This system was one of the most significant factors threatening financial stability during the 2008 global financial crisis. Numerous studies have shown that shadow banking plays a role in the emergence and spread of financial crises. Shadow banking activities are intertwined with traditional banking, and it is not possible to draw clear boundaries between them.

The Financial Stability Board (FSB) has identified regulatory efforts to reduce the systemic risks of shadow banking in five key areas. These are: reducing contagion between the traditional banking system and shadow banking,  reducing the risk of flight from money market funds, increasing the transparency and standardization of securitization transactions, eliminating risks arising from repo and other securities lending transactions, and identifying and attempting to eliminate systemic risks arising from the activities of other shadow banking institutions.

Various institutions operate to ensure financial stability in the markets. Among the prominent institutions in the financial markets are central banks, regulatory and supervisory institutions. Central banks around the world and in our country are taking regulatory measures to address the instability created by shadow banking. The FSB is also conducting important work in this regard. In order to maintain financial stability, it is essential that shadow banking activities are effectively managed and supervised. This study aims to reveal the threats posed by shadow banking to the financial system, its fundamental dynamics and the role of regulation in combating these threats. It also aims to provide recommendations for developing regulatory strategies.