Shadow banking risks should be curbed with unified regulation

Global financial supervision is being strengthened since the global financial crisis. But to make high profits, banks started circumventing the regulatory barriers and launched off-balance sheet businesses, giving rise to shadow banking.

Where there is mismatch between asset maturity and liquidity, lax supervision and information asymmetry, high leverage can easily lead to liquidity and/or systemic risks, even a financial crisis, undermining the stability of the financial market. On the other hand, the dismantling of high-risk shadow banking could help prevent major risks.

So China should implement strict regulatory rules for credit-like financial products, and strengthen supervision of innovative financial products. China's regulatory agencies have for long been seeking to unify supervision of the financial market, especially for high-risk wealth management products, and setting supervision standards for different industries.