Siirry sisältöön
  • Add to calendar
    Bank of Finland, Rauhankatu 19 B, Helsinki 

Le Xia (BBVA Hong Kong): The Regulatory Arbitrage and Window-dressing in Shadow Banking: The Example of Chinese Wealth Management Product

 Co-authors:  Jinghan Cai (University of Scranton), Alicia García-Herrero (Natixis SA), Fengyun Li (Renmin University of China)

 Abstract

 We document that in China the bank-issued wealth management products (WMP)’s maturity dates cluster towards the end of a month and then decrease significantly at the beginning of the following month. Our empirical work detects a negative relationship between a bank’s loan-to-deposit ratio (LDR) at month-ends and the number of its issued WMPs expiring within several days of the month-end. Moreover, this WMP clustering and the negative relationship disappear after the Reform in which regulators bring up measures for banks with a high deposit deviation degree in 2014. We also document that the banks tend to arrange the high-return WMPs to expire around month-ends to attract customers, and this clustering of high-return WMPs also disappears after the Reform. Our findings suggest that banks actively, rather than passively, use WMPs as vehicles for their regulatory arbitrage or window dressing behaviors.

 

BOFIT seminars are open to all researchers interested in the subjects covered.Those wishing to attend a seminar are kindly asked to register in advance, by email bofit(at)bof.fi or tel. +358 9 183 2268.

 

Seminars take place, as a rule, on Tuesdays, starting at 10.30 a.m.  Visitors are escorted to the seminar room from the Rauhankatu 19 B (Library) entrance.