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This article examines the role of the shadow banking system in the global financial crisis of 2007�9. In order to do this, one must first explain the reasons for the explosive growth of shadow banking in the immediate pre-crisis era. Current explanations for this growth tend to hold two contrasting positions: one emphasising factors endogenous to the banking sector (notably regulatory arbitrage and financial innovation); the other emphasising exogenous factors (notably the �search for yield�). Integrating these two explanations, in this article we develop a disaggregated view of the shadow banking system. After clarifying the nature of the relation between the regulated and shadow banking systems, we inquire more closely into the different entities that inhabit the shadow banking system, the different activities that these entities performed and the different financial products that these entities supplied. The disaggregated view of shadow banking suggests that while some parts of the system played an important role in the initial subprime phase of the crisis through their involvement with the toxic securities that were at its centre, other parts of the system were key to the subsequent money and inter-bank phases of the crisis through their close ties with the regulated banks
