In The Shadow of Banks: Wealth Management Products and Issuing Banks’ Risk in China
نویسندگان
چکیده
With regulations on deposit rates and on-balance-sheet lending, Chinese banks have significantly increased off-balance-sheet activities in recent years, most notably by issuing wealth management products. We examine the relationship between the product characteristics and the issuing banks and find that (1) the scale of product issuance is greater for banks constrained more by on-balance-sheet lending quotas, especially for nonguaranteed products and when the difference between market rate and the regulated deposit rate is high; (2) the initial promised yields on the products are positively related to the risk of the issuing banks, especially for non-guaranteed products that are issued to institutional investors (as compared to those issued to individuals); and (3) the issuance poses a substantial rollover risk for issuers on days when large amount of products mature. Overall, the large shadow-banking sector in China appears to be a regulatory arbitrage response, contributing to the fragility of the Chinese banking system. JEL Classifications: G2, E4, L2.
منابع مشابه
Relationship between Corporate Governance and Risk Management
Corporate governance of banks is one of the most important structures required by banks to maintain the health and stability of banks, which can play an important role in managing banks' risk. This paper examines the effect of corporate governance on liquidity risk management, credit risk management, and total bank risk management. We used board structure effectiveness, transparency, and respon...
متن کاملBank’s Corporate Governance: Quantifying the Effects in Iranian Banking Networks
The most important tool for promoting the bank’s stability and health is the establishment of a standard corporate governance structure for managing the bank's business. Redesigning the relationships between bank management, shareholders and the rest of the bank’s stockholder, including the objectives, the risk and audit indices, and internal control of the bank, is recognized as the foundation...
متن کاملAn Analysis about the Long Term Impact of Banks Securitization on Economic Growth
Economic growth is the most common goal in any economy, and capital is one of the most important determinants of growth. In the last few decades, the use of securities in various countries' capital markets has expanded and has become an essential part of the economic system supplying the capital need for investors and other institutions. This study aims to analyze the effect of securities used ...
متن کاملPerformance of Credit Risk Management in Indian Commercial Banks
For banks and financial institutions, credit risk had been an essential factor that needed to be managed well. Credit risk was the possibility that a borrower of counter party would fail to meet its obligations in accordance with agreed terms. Credit risk; therefore arise from the bank’s dealings with or lending to corporate, individuals, and other banks or financial institutions. Credit risk...
متن کاملRisk Management Framework in Islamic Banking: Basel II and III, Challenges and Implications in Islamic Banking
The time to fix the roof is when the sun is shining risk management has not been uppermost on the Islamic banking sector’s agenda in recent years. It is crucial for Islamic banks (IBs) to have comprehensive risk management framework as there is growing realization among IBs that sustainable growth critically depends on the development of a comprehensive risk management framework. Islamic b...
متن کامل