In recent years European financial regulation has experienced a tremendous reorientation with respect to the shadow banking system, which manifested in its reframing as market based finance. While the shadow banking system, with its long chains of credit-intermediation, was initially identified as a source of systemic risk and hence to be appropriately (re-)regulated after the crisis, such initiatives fell much behind the initially envisaged changes. All to the contrary, recent regulatory initiatives aim at revitalizing activities that played a central role during the crisis, most prominently securitisation. This paper set out to shed light on the linkage between the parts of this initiative concerning the re-regulation of Asset-Backed Commercial Paper (ABCP) and the regulation of a vital source of financing for this financial instrument and a prime example of shadow banking, Money Market Mutual Funds (MMFs). This paper retraces the way the recently published frameworks for the re-regulation of MMFs and ABCP at the EU level (in particular the STS, CRR and MMF regulation in 2017) have been transformed in such a way that their final version allows for these two to connect without any frictions, reestablishing the shadow banking chain which links MMFs, the ABCP market and the banking system. Based on documentary analysis and expert interviews, it is shown how national and European regulators cooperatively created a framework that protects the triadic link between banks and those shadow banking institutions. We argue that far from being captured by the industry, they did so consciously in order to maintain a channel for credit creation outside of bank credit. Thereby, this paper contributes to a new strand of literature, seeing the creation and reconfiguration of the shadow banking system as characterized by the active and conscious role of state actors.
