Shadow Banking

In: Business and Management

Submitted By garytam1
Words 2498
Pages 10
Term paper of Ef4461
Topic : Shadow Banking in China
Created by Pan
Date: 24/4/2015

Abstract: In this paper , I will examine the China’s shadow banking for its potential risks. China, an expansion of risky and complicated financial practices in the world’s second-largest economy , what is the potential risk behind?
Introduction:

From Bloomberg, the definition of“shadow banking” encompasses risky investment products, lending between individuals, pawnshop and loan-shark operations in emerging markets, as well as more respectable activities like derivatives, money-market funds, securities lending and repurchase agreements at financial institutions
These activities are beyond the control regular banking system and regulators. Therefore are exempt from the limited regulations and oversight placed on the traditional banking sector. So it is hard to restrict risky lending for the regulators. In china, savings deposit rates of 3 percent which is lower than the target for inflation, combined with at least 90% of small businesses could not get bank loans which propelled the shadow-banking sector to an estimated $6 trillion.

Overview of shadow banking in the world and China
There are $75 trillion global shadow banking assets worldwide in 2013 according to Financial Stability Board Report,(Appendix 2). After 2008 crisis, The U.S. and the euro area each accounted for a global shadow banking assets, followed by Britain with a 12 percent share and Japan’s 5 percent share(Appendix3). In 2013 , The euro and US have the largest Other Financial Intermediary (OFI) sector, each with just above $25 trillion , representing a third of global Monitoring Universe of Non-Bank Financial Intermediation (MUNFI) asset (Appendix4). The UK has the third largest OFI sector amounting to $9.3 trillion in 2013, a 12% share of the 20+EA-group total. Combined together, the euro area, U.S.…...

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