What are the characteristics of the Shadow Banking System?

One of the main characteristics for the Shadow Banking System is that it tends to be less regulated when it is compared to traditional banks that are highly regulated. Second main character is that the fact which states that this system tend to be less regulated than the traditional banks indicates that regulatory arbitrage drives the demand for shadow banking. In addition, the fact that this system is not regulated heavily shows how risky the system is, however, the higher the risk the higher the return as well.