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Simin Gao

Systemic risk caused by financial distress and bank runs can seriously threaten economic stability. This is most pronounced when the banking system dominates a jurisdiction’s financial system. Michael Wucker created a famous metaphor which is often ignored, ‘the grey rhino’, to describe the obvious risk. In China, this problem is extremely acute with the threat of large problematic or systemic banks being akin to a dangerous ‘grey rhino’. Large bank failures can cause an economic meltdown and systemic risk that, until recently, has been ignored by regulators. Prudential regulation and the resolution of systemic banks, or ‘anti-grey rhino solutions’, have since become central to banking regulation in China. This chapter will discuss the macro- and micro-prudential regulation of banks in China, which aim to mitigate exogenous risk.

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Simin Gao and Christopher (Chao-Hung) Chen

This chapter examines multi-level transnational business governance interactions (TBGIs) amongst schemes regulating global derivatives markets. It employs theories of coercive, mimetic and normative isomorphism to explain why Western governance models dominate, why governance models vary between the futures and over-the-counter (OTC) markets, and why East Asian state and market actors sometimes resist Western models. Futures exchanges worldwide adopt similar governance techniques, illustrating the forces of mimetic and normative isomorphism. The monopoly of the International Swaps and Derivatives Association (ISDA) scheme over the governance of the over-the-counter (OTC) market evidences mimetic isomorphism. After the global financial crisis, both the OTC and futures regimes were disrupted by the G20’s coercive isomorphism, which consolidated Western dominance but generated resistance by some Asian regulators and exchange operators. The authors emphasize not just asymmetric Western power, but also the agency of Asian state and market actors who resist Western models to protect local interests.