Shadow Banking and Systemic Risk in Europe and China

Hsu, S., Li, J. & Qin, Y. (2013). Shadow Banking and Systemic Risk in Europe and China (Report No. 2013-02). London, UK: City Political Economy Research Centre (CITYPERC), Department of International Politics, City University London.

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Abstract

We compare the European and Chinese shadow banking systems. While the European shadow banking system is better developed than the Chinese shadow banking system, herd behavior and other factors in European markets create systemic risk, which contributed in part to the financial crisis. Dispersion of risk across the "under-developed" shadow banking system in China has led to some cases of localized, concentrated risk, but not to systemic risk. We discuss proposed European shadow banking regulation and its implications for systemic risk, and discuss what lessons China might glean from such policies. We also discuss what lessons
China's diverse and systemically uncoordinated shadow banking sector might provide for Europe.

Item Type: Monograph (Working Paper)
Subjects: H Social Sciences > HG Finance
Divisions: School of Social Sciences > Department of International Politics > CITYPERC Working Paper Series
URI: http://openaccess.city.ac.uk/id/eprint/2099

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