Caixin OnlineOpinionCommentaries Coming out of the Shadows
10.30.2012 18:45

Coming out of the Shadows

The shadow banking system is thought of as inherently dangerous, but if it is well-managed and transparent it can benefit an economy
By Shi Lei

Since the collapse of banks in the United States and Europe triggered the global financial crisis, the "shadow banking system" has been regarded as something of a ghost. From a legal perspective, it is not real banking system, but it possesses almost all the financial and credit functions that banks have. At the same time, it enjoys looser supervision.

In other words, the shadow banking system offers higher leverage and returns with lower costs, something that is attractive to many financial institutions. But it is also vulnerable and dangerous in the eyes of regulators.

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