Shadow Banking and Systemic Risk in Europe and China
CITYPERC Working Paper Series No. 2013/02
21 Pages Posted: 12 Feb 2013
Date Written: February 1, 2013
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.
Keywords: China, Europe, shadow banking, systemic risk, CITYPERC
JEL Classification: P16
Suggested Citation: Suggested Citation