Shadow Banking Credit Intermediation： Determinants of Default Risks in Securitization and Collateralization

The growth in shadow banking system over the past few years is acknowledged as the key risk to Malaysia＇s financial stability. This is because that it is associated with growth in the household debts extended by the shadow banks. In line with initiatives by the Bank Negara Malaysia （the Central Bank of Malaysia） to enhance surveillance on the activities of the shadow banks in Malaysia, this study attempts to examine the determinants of default risks of shadow banks restricting to focus on their two main activities： securitization and collateralization. The results provide empirical evidence that future methodology to examine the systemic risks in the shadow banking system may need to account for additional explanatory variables that measure collateralized assets that are being intermediated.

Shadow banking:a bibliometric and content analysis

This study reports on our systematic review of 2008–2021 literature on shadow banking.We present an overview of the shadow banking sector,wherein we discuss the definitions,evolution,functions,and specific activities that comprise it.We conducted a bibliometric analysis using the VOSviewer bibliometric tool on articles collected from the Scopus database,after which we conducted content analysis on top articles from leading sources,and identified four major streams of shadow banking literature.Additionally,we identified gaps in the literature and proposed seven research questions to be addressed in future studies to advance knowledge of the shadow banking sector.The findings of this review may serve as a robust reference for scholars researching various aspects of shadow banking to develop our understanding of this sector.

Analysis of the financial crisis after the era of Chinese-style shadow banking and regulatory proposals

In 2007, the U.S. subprime crisis -induced global financial crisis swept across the world rapidly, triggering a reflection of Governments on financial regulatory philosophy and systems, it also brought the shadow banking finance in front of the majority of people, it has become the focus of attention. Various management measures have been taken around the shadow banking, and it has brought great volatility to currency and financial markets, and it also highlights the plight of Chinese shadow banking supervision. Therefore, this article briefly analyzes the mechanism of the Financial Times in the Chinese style shadow banking, and makes several regulatory proposals, avoiding low risk of shadow banking at the greatest degree.

The Value Choice for Legal Regulation of Financial Risks in Shadow Banking

It is of vital importance for shadow banking supervision to have correct targets for the curtailment of financial risks.In fact,the process of selecting legal regulation targets for shadow banking financial risks is equivalent to a process of achieving specific goals or objectives by means of legal regulation.The establishment of a regulatory system for shadow banking should consider the objective and practical needs of the sector,prioritize security as the desired value,and reasonably establish a value system for risk control.

Collateral Monetary Policy,Regional Financial Development,and Nonfinancial Firms'Shadow Banking Activities

The disparity in credit access between large firms and small and medium-sized enterprises contributes to the prevalence of shadow banking activities,where large,nonfinancial firms with high credit ratings have become new financial intermediaries.These activities vary geographically and are afected significantly by collateral monetary policy.This paper examines the effect of collateral monetary policy,its reform,and regional financial development characteristics on large firms'shadow banking activities,with a focus on the medium-term lending facility(MLF),the primary collateral monetary policy instrument in China.The results indicate that the MLF encouraged large firms'shadow banking activity.However,the MLF reform in 2018 mitigated this effect by broadening the range of acceptable collateral.Regional financial development,such as a higher number of bank branches around firms,facilitated large firms'shadow banking activities and amplified the MLF's stimulating effect.In contrast,regional advancements in digital finance and market development limited both shadow banking activities and MLF's impact.

Roles of Financial Innovation and Information Technology:Lessons from US Sub-prime Mortgage Crisis and Its Implications for China

The mortgage loan has evolved from a local lending instrument into a major global security and its role is unparallel to other financial instruments in the process of financial globalization. This paper explains how technology and financial innovation transformed the mortgage loan from a local security into a premier global security traded worldwide. It examines the fundamental flaws of this process and why it does not work in regards to mortgage lending and the re-securitization products that were created through financial innovation. The findings show that regulation was unable to keep pace with financial innovation, which created an environment where actors in the financial service sector were able to behave geographically irresponsibly by using information asymmetries to their advantage by par- ticipating in moral hazard activities and engaging in other immoral and unethical business practices that were centered around localized geography, which ultimately contributed to the global financial crisis. It also examines the roll of financial innovation in regard to the Lehman Brothers Mini-Bond in Hung and its role as a driving force behind China＇s newly emerging shadow banking sector. It concludes with a policy recommendation and its implication for China＇s continued economic development.

COVID‑19 pandemic risk and probability of loan default:evidence from marketplace lending market

As the COVID-19 pandemic adversely affects the financial markets,a better understanding of the lending dynamics of a successful marketplace is necessary under the conditions of financial distress.Using the loan book database of Mintos(Latvia)and employing logit regression method,we provide evidence of the pandemic-induced exposure to default risk in the marketplace lending market.Our analysis indicates that the probability of default increases from 0.056 in the pre-pandemic period to 0.079 in the post-pandemic period.COVID-19 pandemic has a significant impact on default risk during May and June of 2020.We also find that the magnitude of the impact of COVID-19 risk is higher for borrowers with lower credit ratings and in countries with low levels of FinTech adoption.Our main findings are robust to sample selection bias allowing for a better understanding of and quantifying risks related to FinTech loans during the pandemic and periods of overall economic distress.

Investigating the Financial Crisis in 2008 from the Perspective of Banking Systems

The financial crisis of 2008 precipitated by credit issues in the US housing market is probably one of the most profound financial events in recorded history.Its shockwaves have significantly affected almost every market centre as well as country in the world.The aim of this report is accordingly to investigate major reasons behind the crisis from a special angle of banking systems.In particular,problems hidden in regulations,mechanisms and systems in the wake of the financial crisis are focused specifically in this report.

Do In terest Rate Liberalizati on and Fin tech Mix?Impact on Shadow Deposits in China

In this paper we attempt to characterize the stability of shadow deposits in China with interest rate liberalization and fintech developments.We emphasize that shadow banks provide higher but riskier returns and such characteristics affect the stability of shadow deposits.In our setting,the stability of shadow deposits is influenced by two offsetting effects,namely:the patience effect,which makes investors more willing to wait because of the potentially higher returns;and the uncertainty effect,which makes investors more likely to withdraw as a result of higher risk.Under liberalized interest rates,the patience effect will erode and the uncertainty effect will be heightened because the post-liberalization higher return of traditional banks undermines the importance of the extra return of shadow deposits to depositors,while preserving the importance of the risk aspect.Fintech development is modeled as a reduction in the withdrawal cost that facilitates runs.This affects the stability of shadow deposits because of their wider fintech reliance.Regulators should be cautious in pushing interest rate liberalization andfintech application alongside building a safety net for shadow banking.

What Drives Cost Efficiency of Banks in China？

This study uses stochastic frontier analysis to examine the factors that influenced cost efficiency of banks in China from 2005 to 2013. The results indicate that policy variables, such as the reserve requirement ratio, the interest rate spread and open market operations by the People＇s Bank of China, are effective in improving the cost efficiency of banks, but shadow banking variables may reduce cost efficiency. Among the various bank types, city commercial banks appear to be the most efficient and foreign banks are the least efficient. The present study suggests that policy-makers can have a positive influence on bank cost efficiency by adjusting macro policy variables on different types of banks and by requiring more information on the shadow banking activities to improve monitoring.

Comparison of Bank Profitability in China and the USA

This paper examines and compares the profitability of banks in the USA and China. The USA has the largest market-based banking system and the financial system of China is still bank-based. Our analysis indicates that in terms of profitability, banks in China outperformed those in the USA during our study period （2008-2014）. Real estate loans had an adverse effect on US bank profitability during the financial crisis and no effect after the crisis but consistently improved the profitability of Chinese banks. Interest margins have no effect on US bank profitability but a consistently positive effect on Chinese banks, confirming that China is a traditional bank-based economy. Interbank loans have a positive and significant effect on Chinese bank profitability, while interbank domestic loans have a negative effect on US bank profitability. Finally, size had a positive effect on US banks after the financial crisis period, confirming the scale economies of large US banks, but a negative effect on Chinese banks, indicating diseconomies of scale.

The roadmap of interest rate liberalisation in China

This paper examines the roadmap of interest rate liberalisation in China,including the current dual-track interest rate system and the future benchmark rate system.It provides a theoretical foundation for China to develop its own benchmark interest rate.A vector autoregression model is estimated to investigate the effectiveness of Chinese market interest rates,Shanghai Interbank Offered Rate(SHIBOR),and repo rates against different factors such as market size,volatility,transmission channels of monetary policy,and term structures of interest rates.The result shows that SHIBOR affects both the market and the economy.As SHIBOR promptly reflects the changes in currency markets,we argue that it has the potential to become China’s benchmark interest rate.