This paper analyses the development of shadow banking and considers the challenges it poses for regulators and supervisors vis‐à‐vis latest developments regarding i) the Banking Union, which led to the Single Supervisory Mechanism that became operational in November 2014, and ii) the Capital Markets Union that is one of the most important projects of the Juncker Commission. The focus is on the interconnections between the various elements of the financial system and their impact on systemic risk in the perspective that the financial system is a fundamental infrastructure of the economy and should be structured in order to contribute to growth and job creation.