Research Handbook on Shadow Banking
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Research Handbook on Shadow Banking

Legal and Regulatory Aspects

Edited by Iris H.-Y. Chiu and Iain G. MacNeil

Research Handbook on Shadow Banking brings together a range of international experts to discuss shadow banking activities, the purposes they serve, the risks they pose to the financial system and implications for regulators and the regulatory perimeter. Including discussions specific to the UK, European Union, US, China and Singapore, this book offers high level and theoretical perspectives on shadow banking and regulatory risks, as well as more detailed explorations of specific markets in shadow banking.
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Chapter 14: Understanding shadow banking in the Chinese context: shadow banking with Chinese characteristics

Wei Shen

Abstract

According to the report released by the Financial Stability Board (FSB) in November 2011, shadow banking is defined as ‘credit intermediation involving entities and activities outside the regular banking system’. Put differently but simply, shadow banking is the realm of lending that does not rely on deposit-taking banks using customer money to fund loans. The International Monetary Fund (IMF) defines the shadow banking system as ‘off-balance-sheet and non-bank financial intermediation’ including Internet finance, micro-lending, asset securitization and some wealth management products. ‘Shadow banks’ in the context of Western countries refer to buy-out firms, hedge funds, venture funds and ordinary corporations which are using their investors’ money and wholesale funding to hire disgruntled bank traders, engage in direct lending and escape traditional banking regulation. In more advanced economies, shadow banking remains a key channel of credit intermediation that complements the formal banking system.

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