Friday, March 1, 2013

China’s brokerages turn shadow banks

Chinese securities brokerages have emerged as a crucial new link in the country’sshadow banking industry, a development that underscores how financial risks are spreading more widely in China.
People familiar with brokerages say they got started in shadow financing around the middle of last year, taking control of funds that banks wanted to remove from their balance sheets.

A growth in Iv-B banking as companies try to find ways around I-O policing and the market. This may grow exponentially to a ceiling and then crash to some degree. These off sheet assets become hidden and deceptive as Iv-B. They are not easily manageable because they are so hidden, they also grow in the cracks where they are not seen by regulators. 
New industry data confirm this development and reveal a dramatic increase in such activity in the fourth quarter. For 2012 as a whole, shadow financing via brokerages appears to have increased almost 600 per cent.
Western rating agencies have warned that a rapid rise in off-balance-sheet banking activity is a threat to China’s financial stability. But Chinese regulators have countered by saying the risks are manageable. With the country’s financial system long dominated by state-run banks, they also view shadow lending as a byproduct of their attempts to unleash more market forces in the allocation of capital in China.

No comments:

Post a Comment

Note: Only a member of this blog may post a comment.