(China Alert) Shadow banking whac-a-mole

– Regulators have released numerous regulations to curb shadow banking in recent months
– Institutions are actively reallocating assets in response
– FMCs are building out capabilities to meet institutional demand

Update: The sprawling shadow banking industry is being pushed into a corner as restrictions grow. Regulators from all sides are forcing financial institutions to cut down on shadow banking, whether it be bank wealth management products (BWMPs), FMC subsidiaries or P2P lending. While such crackdowns aren’t new, firm reactions are now different and potentially lucrative for managers and this will only continue in the future: institutions are being pushed toward open-market asset allocations via external management. Banks in particular have begun issuing more fixed income mandates and investing into mutual fund products specifically designed for their needs. They are being forced to turn to more viable alternatives as China forces shadow banking to become more transparent.

Shadow banking crackdowns aren’t particularly new to China but Z-Ben Advisors believes the more interesting and immediate implication is a steady build in bank mandates over the next five years …

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