EU Considers New Controls for Shadow Banking Sector

The European Commission is widening its (1) __________ powers to include shadow
banking, heralding new controls over the sprawling and largely unchartered 46 trillion euro
sector blamed for helping trigger the financial crisis. The EUs (2) __________ launched a
consultation with industry on Monday, with a view to writing rules to control shadow
banking, a term describing activity resembling the basic borrow-and-lend model of banks.
We do not want financial activities and entities to (3) __________ existing and foreseen
rules, allowing new sources of risk to accumulate in the financial sector, said a spokesman.

Hedge funds and private (4) __________ are often cited as examples of shadow banking.
But the term can also take in investment funds and even cash-rich firms that lend
government bonds to banks, and which in turn use them as (5) __________ when taking
credit from the European Central Bank. Shadow banking can also refer to offshore vehicles,
such as those banks used before the crisis for (6) __________, using credit or borrowed
capital to increase the earning potential of stock. The sector, which operates on the
(7) __________ of mainstream banking, has more than doubled over the past decade.

Any European regulation will be cast within the Financial Stability Boards (FSB)
(8) __________, although there is always scope for Brussels to sharpen certain rules.
Difficulty in agreeing an exact definition of the problem, however, may (9) __________
attempts to regulate it. The Commission, which writes the first (10) __________ of EU laws
before seeking the green light from the blocs 27 member states and the European
Parliament, said it was focusing on asset management, securities lending and repurchase
agreements, securitization, and other shadow banking entities.

(1) A rigidity B regulatory C authoritarian D remit
(2) A executioner B exhibitor C executive D executor
(3) A circumnavigate B circumspect C circumscribe D circumvent
(4) A equality B equity C equanimity D equerry
(5) A safety B security C protection D threshold
(6) A exertion B advantage C application D leverage
(7) A fringes B outskirts C suburbs D environs
(8) A purpose B rationale C framework D agenda
(9) A underline B underpin C undermine D underscore
(10) A draft B drawing C statute D sketch

Q. Do you think it is right to regulate the shadow banking industry?