The European Commission has published a communication on shadow banking
which sets out the Commission’s roadmap which aims to limit the emergence of
risks (in particular systemic risks) in the unregulated or less regulated
financial system. 

The Communication identifies five priority areas on which the Commission is
establishing initiatives. 

The first priority area is in respect of increased transparency. 

The Commission states that in order for authorities to be able to monitor risks in
an effective manner and intervene when necessary, it is essential to collect
detailed, reliable and comprehensive data.  Therefore Authorities must continue in their efforts to supplement and enhance their statistical tools. The Commission identifies that in this context there are four projects that merit priority treatment.  These are:

• supplementing initiatives regarding the collection and exchange of data - to identify data gaps that prevent adequate and comprehensive assessments at least annually;
• developing central repositories for derivatives within the framework of the European Markets Infrastructure Regulation and the      revision of the Markets in Financial Instruments Directive (MiFID) - to   better identify transfers of risks.  The collection of this data by trade repositories provides immediate access to detailed information on the interconnectedness of the different “actors”.  The revision of MiFID will also make it possible to increase the transparency of bonds, structured
  products, derivative instruments, emission allowances and high-frequency
  trading;
• implementing the legal entity identifier - to collect much more information on the entities that carry out financial transactions and help supervisory authorities to monitor all financial “actors”, regulated and unregulated, on a cross-border basis.  In particular, it will make it possible to identify risk concentration in the financial system, simplify reporting systems and to improve the quality of data and risk management by financial operators; and 
• increasing the transparency of securities financing transactions - to observe the risks associated with interconnectedness, excessive leverage and pro-cyclical behaviours. This will permit the identification of risk factors such as excessive  recourse to short-term funding to finance long-term assets, high
   dependence on certain types of collateral and shortcomings in assessing
    them. 

 The other 4 priority areas for initiatives relate to:

• enhancing the framework for certain investment funds: for money market funds and strengthening the UCITS framework;
• reducing the risks associated with securities financing transactions;
• strengthening the prudential banking framework in order to limit contagion and arbitrage risks; and
• increasing the supervision of the shadow banking sector.

A set of related frequently asked questions has also been published.

 Related Link:

http://ec.europa.eu/transparency/regdoc/rep/1/2013/EN/1-2013-614-EN-F1-1.Pdf