Saturday, June 6, 2015

New Scholarship on Shadow Banking

"The Shadow Banking System - Why it Will Hamper the Effectiveness of Basel III"
Emily Lee
Journal of International Banking Law and Regulation
Vol. 12, July 2015 (forthcoming)
Abstract: This article examines why regulatory arbitrage and the interconnectivity between the traditional banking and shadow banking systems amplified the pro-cyclicality during the global financial crisis of 2007-2009; and discusses why the regulatory focus should turn to reducing the interconnectedness of the two systems in order to prevent systemic risk to the global financial system. This article also predicts that Basel III’s heightened capital requirements will have a limited impact on curbing shadow banking activities and may inadvertently push traditional banks to rely even more on shadow banking in order to sustain their financial position or to generate greater revenue.  Click here to download the article.

Susan Finder (Fellow, Centre for Chinese Law)
The Diplomat
5 June 2015
Many bankers and economists have been looking at shadow banking in China. But what happens when debtors fail to pay their debts or challenge the lending arrangements? When parties to shadow lending end up in dispute resolution, it raises unique issues for the institutions that hear those cases.
     What few outside of China have noticed is that shadow lending disputes account for an increasingly large proportion of civil cases in the Chinese courts and involve increasingly large amounts of money. The law on shadow lending is particularly unclear and fluid, causing uncertainty for debtors, lenders, and judges.
     Government recognition of internet lending and peer-to-peer (P2P) lending, now at an early stage, likely means that many more shadow lending disputes are destined for the already stressed court system...  Click here to read the full article.

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