A diagram by the Bank of International Settlements (BIS) has revealed that China's shadow banking sector is even more indecipherable and complex than its US counterpart. In particular BIS pointed to uncertainty about who would be financially responsible when a debt for equity swap defaulted. “New and more complex ‘structured’ shadow credit intermediation has emerged and quickly reached a large scale,” noted BIS, with this complexity packaged and sold through wealth management products. The Chinese government has been trying hard to crack down on money laundering in recent years.
A diagram by the Bank of International Settlements (BIS) has revealed that China's shadow banking sector is even more indecipherable and complex than its US counterpart. In particular BIS pointed to uncertainty about who would be financially responsible when a debt for equity swap defaulted. “New and more complex ‘structured’ shadow credit intermediation has emerged and quickly reached a large scale,” noted BIS, with this complexity packaged and sold through wealth management products. If there were to be a financial crash, this complexity would make it worse.