12/12/17

Chinese Banks Push Back On Shadow Banking Regulations – Expose “Catch-22” For Financial System



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Chinese Banks Push Back On Shadow Banking Regulations – Expose "Catch-22" For Financial System
// Silver For The People

zerohedge.com / by Tyler Durden / Dec 11, 2017 

In November, we discussed how the post-Party Congress measures to deleverage and crackdown on the worst abuses in China's credit bubble took an important step forward with the announcement of a new era of regulation for China's $15 trillion shadow banking and asset management industry. See "A New Era In Chinese Regulation Means Turmoil For $15 Trillion In China's Shadows". In particular, the authorities turned their sights on wealth management products (WMPs).

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On the way out are "guaranteed returns" and "capital pools" which had turned the $4 trillion sector into a leveraged Ponzi scheme. We joked that in a "radical and shocking" departure from the norm, financial institutions would have to offer yields based on the risk and returns of the underlying assets. Paying out guaranteed returns with new funds from depositors would no longer be allowed.

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