Wealth Management Products in the Context of China’s Shadow Banking: Systemic Risks, Consumer Protection and Regulatory Instruments

2015 ◽  
Vol 23 (1) ◽  
pp. 91-123 ◽  
Author(s):  
Shen Wei
Keyword(s):  
Consumer Protection ◽  
Shadow Banking ◽  
Wealth Management ◽  
Systemic Risks ◽  
Regulatory Instruments

Shadow banking from China's perspective: an empirical analysis of bank-issued wealth management products

2021 ◽  
Vol ahead-of-print (ahead-of-print) ◽  
Author(s):  
Syed Mehmood Raza Shah ◽  
Qiang Fu ◽  
Ghulam Abbas ◽  
Muhammad Usman Arshad
Keyword(s):  
Commercial Banks ◽  
Fixed Effects ◽  
Banking Sector ◽  
Balance Sheet ◽  
Estimation Method ◽  
Least Square ◽  
Shadow Banking ◽  
Content Type ◽  
Wealth Management ◽  
Chinese Banks

PurposeWealth Management Products (WMPs) are the largest and most crucial component of China's Shadow banking, which are off the balance sheet and considered as a substitute for deposits. Commercial banks in China are involved in the issuance of WMPs mainly to; evade the regulatory restrictions, move non-performing loans away from the balance sheet, chase the profits and take advantage of yield spread (the difference between WMPs yield and deposit rate).Design/methodology/approachIn this study, the authors investigate what bank related characteristics and needs; influenced and prompted the issuance of WMPs. By using a quarterly panel data from 2010 to 2019, this study performed the fixed effects approach favored by the Hausman specification test, and a feasible generalized least square (FGLS) estimation method is employed to deal with any issues of heteroscedasticity and auto-correlation.FindingsThis study found that there is a positive and significant association between the non-performing loan ratio and the issuance of WMPs. Moreover, profitability and spread were found to play an essential role in the issuance of WMPs. The findings of this study suggest that WMPs are issued for multi-purpose, and off the balance sheet status of these products makes them very lucrative for regulated Chinese commercial banks.Research limitations/implicationsNon-guaranteed WMPs are considered as an item of shadow banking in China, as banks do not consolidate this type of WMPs into their balance sheet; due to that reason, there is no individual bank data available for the amount of WMPs. The authors use the number of WMPs issued by banks as a proxy for the bank's exposure to the WMPs business.Practical implicationsFrom a regulatory perspective, this study helps regulators to understand the risk associated with the issuance of WMPs; by providing empirical evidence that Chinese banks issue WMPs to hide the actual risk of non-performing loans, and this practice could mislead the regulators to evaluate the bank credit risk and loan quality. This study also identifies that Chinese banks issue WMPs for multi-purpose; this can help potential investors to understand the dynamics of WMPs issuance.Originality/valueThis research is innovative in its orientation because it is designed to investigate the less explored wealth management products (WMPs) issued by Chinese banks. This study's content includes not only innovation but also contributes to the existing literature on the shadow banking sector in terms of regulatory arbitrage. Moreover, the inclusion of FGLS estimation models, ten years of quarterly data, and the top 30 Chinese banks (covers 70% of the total Chinese commercial banking system's assets) make this research more comprehensive and significant.

scholarly journals ANALYSIS OF INSTRUMENTAL SECURITY OF MACROPRUDENTIAL POLICY IN UKRAINE

2020 ◽  
pp. 83-90
Author(s):  
Makarenko Mykhailo ◽  
Yana Smolova
Keyword(s):  
Financial Stability ◽  
Banking System ◽  
Bank Lending ◽  
Capital Requirements ◽  
Macroprudential Policy ◽  
Systemic Risks ◽  
Regulatory Instruments ◽  
Potential Benefits ◽  
Systemic Crises ◽  
Near Future

Introduction. The issue of protecting the national economy from systemic risks is burning nowadays. Over the past two decades, systemic crises that periodically occur in financial markets have caused significant losses to the economies of many countries. And Ukraine is not an exception. Its losses from the last crisis of 2014-2015 amounted to about 40% of GDP. Ithas reflected in reduction of economic growth and bank lending. As a result, the function of ensuring financial stability has been included in the NBU's mandate. In the article the main objectives of macroprudential policy for the implementation of regulatory instruments have been identified. The most effective macroprudential instruments used in foreign practice have been studied.The degree of its implementation and efficiency in Ukraine has been analyzed. The potential benefits of macroprudential tools that are going to be emplementedin the near future have been considered. Purpose. The purpose of the article is to study theoretical and practical aspects of macroprudential instruments implementation inUkraine. Method (methodology). In the article the general and special research methods were used, in particular, logical generalization – in characterizing macroprudential policy, identifying its goals and tools, comparative analysis – in comparing thepractice of macroprudential instruments in Ukraine and abroad, determining the benefits of tools, systematization – while grouping the tools according to certain criteria. Results. Based on theresults of the study, conclusions and recommendations were formulated. In particular, the refend to accelerate the process of implementing macroprudential instruments, focusing on the tools that NBU already has in its arsenal, was considered. Possible difficulties for the banking system caused by capital requirements increase have been identified.

scholarly journals Shadow Banking in India: Nature, Trends, Concerns and Policy Interventions

2019 ◽  
Vol 12 (2) ◽  
pp. 29-46
Author(s):  
Sashi Sivramkrishna ◽  
Soyra Gune ◽  
Kasturi Kandalam ◽  
Advait Moharir
Keyword(s):  
Banking Sector ◽  
Banking System ◽  
Shadow Banking ◽  
Secondary Sources ◽  
Shadow Banks ◽  
Massive Growth ◽  
Policy Interventions ◽  
Systemic Risks ◽  
Credit Cycle ◽  
Shadow Banking System

AbstractWhile the origin of shadow banks may be traced to the 1970s, developing countries have witnessed a massive growth of shadow banks in more recent decades. India too has seen a similar growth in shadow banks; however, the recent 2018 collapse of IL&FS Group, a major shadow bank, disrupted the credit cycle, stalled investment and even affected overall GDP growth. With experts warning that shadow banks are susceptible to systemic risks and crisis, it becomes imperative to understand the shadow banking system better. In this paper, we use exploratory data analysis – both quantitative and qualitative – to draw attention to the need for definitional clarity in the concept of shadow banks and how they operate. Trends in Indian shadow banking are discussed using data drawn from secondary sources. Systemic risks in India’s shadow banking sector are identified and policy interventions are discussed. The study is imperative for highlighting the importance of shadow banking in India, its growth and the evolving policy interventions regulating this important component of the financial system.

scholarly journals “High Quality Securitisation and EU Capital Markets Union – Is it Possible?”

2016 ◽  
Vol 7 (3) ◽  
Author(s):  
Vincenzo Bavoso
Keyword(s):  
Capital Markets ◽  
Banking System ◽  
Shadow Banking ◽  
Systemic Risks ◽  
Capital Markets Union ◽  
Current Design ◽  
Policy Objectives ◽  
Shadow Banking System ◽  
Eu Project ◽  
Public Consultations

AbstractThe resurrection of the securitisation market lies at the heart of the recent EU project to build a pan-European capital markets union (CMU). This is in line with the existing policy goal to expand market-based, disintermediated financing channels, which has been ongoing since the 1980s. Initial efforts to restart the moribund securitisation market in Europe have been carried out through a number of public consultations which have more recently converged towards the Commission’s proposal for a Regulation laying down the rules to create a European framework for Simple, Transparent and Standardised (STS) securitisation. This article provides a critical perspective on the EU project to create a capital market union and in particular on the proposed framework for STS securitisation. The critique is firstly centred on the problematic coordination of the different policy objectives, which emerged from the consultations’ responses. Secondly, it points to four specific areas of concern, namely, the difficulty to define securitisation for the purpose of the regulation, the dangers of linkages with the shadow banking system, the unresolved reliance on external ratings, and the question of STS supervision. It is argued in this article that the persistence of these problems in the current design leads to questioning whether a revived securitisation market would still fuel the shadow banking system and create systemic risks. It is pointed out that the difficulty to regulate complex legal relationships typical of long intermediation chains – such as tranched securitisation – makes the proposed framework still weak. This article submits that only a tighter approach to transaction standardisation could ensure the simplicity and transparency that the Commission is hoping to achieve. Equally, a supervisory infrastructure centred on the overseeing power of a pan-European authority is needed to prevent pre-crisis legal problems from recurring.

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