That can provide hints on activity in China's vast and
unregulated shadow banking sector, which authorities have also been targeting in their campaign to reduce systemic risks.
Among the main concerns is the
booming shadow banking sector, a potential source of unregulated loans to speculators in whatever the latest craze happens to be.
In fact, the value of nonperforming loans could get even worse, if only people knew just what was happening inside of this
murky shadow banking sector.
It was a time of sharply rising debt in China, and the
risky shadow banking sector (i.e., off - balance sheet opaque lending) was growing rapidly, with few apparent controls.
Between the perennial risks of the
unregulated shadow banking sector and speculation fueled by central bank policies to the prospect of a sudden crackdown on whatever the bureaucrats designate as «corruption,» the world's second largest stock market — and second largest economy — has been excessively interesting.
Some observers predict that such borrowers will be forced to tap networks of small investors who lend through mortgage brokers, as well as mortgage investment corporations — in other words, the most remote corners of Canada's
shadow banking sector, which accounts for 40 % of Canada's banking space.
Such an outcome could prove to be a classic unintended consequence: Morneau's reforms — meant to reduce or contain the accumulated risk created by precipitously over-leveraged homebuyers — may unwittingly increase the overall systemic risk in the economy by driving red - lined borrowers to the sort of uninsured subprime mortgages that have proliferated in
the shadow banking sector.
«
The shadow banking sector may actually shrink.»
Zhenfu turned to
the shadow banking sector after being rejected by the traditional banks.
In assessing China's
shadow banking sector, Moody's determined that debt in the country was moving into «comparatively better regulated parts,» which improves transparency «and may increase the system's resilience to unexpected shocks.»
The reforms enacted through the 2010 Dodd - Frank Wall Street Reform and Consumer Protection Act focused primarily on the banking industry, leaving
the shadow banking sector largely intact.
Despite my strong affinity toward the asset management industry, I fear for the implication of regulators labeling it «
shadow banking sector ``, i.e. asset managers who have stepped - in to fund projects and make loans as risk averse banks retreated.
Having the 2nd most senior FED official focusing on regulating the nonbank /
shadow banking sector is a warning sign of tougher regulation to come.
The next bit of financial reform will have to increase oversight of
the shadow banking sector (that is, institutions that in some ways operate like banks but have so far escaped stricter rules) and over-the-counter-derivatives, which are privately negotiated and have remained unregulated.
As The Economist points out, China's
shadow banking sector is the largest and possibly the fastest growing in the world:
However the book was «only» updated in 2012, and plenty has happened since then, in particular in the fintech portion of China's
shadow banking sector.
China's
shadow banking sector is piling up risk at the heart of the financial system and keeping deadbeat firms alive.
The increase in gold premiums in China over spot gold prices in recent months may indicate Chinese investor anxiety over the election of Donald Trump or coincidently growing nervousness within China over the fragility of its financial system that is being tested with failures in
the shadow banking sector.
«There is a perceived risk to the financial markets including
a shadow banking sector that may provide unregulated services to avoid detection by authorities and to protect the identity of those providing and receiving the funds,» the email further detailed.
Currently, about 85 % of foreign exchange operations in the country is carried out in
the shadow banking sector.