ABSTRACT
Whether it is the United States’ Dodd Frank financial reform bill or the Financial Stability Board’s (FSB) regulatory framework, there are clear international principles for shadow banking regulation. They involve simultaneous encouragement of its development, increased regulation, and reduction in the systemic risks it implies. Although China’s level of financial development is different from nations like the United States, we still need to balance the same fundamental considerations for regulatory policy: reasonable apportionment of regulatory responsibility, manageable levels of financial innovation, and stable financial development. This chapter first systematically covers the FSBs regulatory framework for shadow banking and then uses the framework to provide specific recommendations for its regulation in China.
