Financial stability reforms in Eurozone and China – experiences in implementing Basel standards

The aim of this article is to evaluate the existing differences in managing financial stability in the European Union (EU) and China and the net impact that changing prudential requirements had on credit institutions over the years. The first part of the article presents an overview of the regulatory reforms undertaken in both regions. Second part presents the results of a quantitative comparative study using multivariate comparative analysis, measuring the relative financial condition of the largest credit institutions from China and the EU. Results confirm that the new prudential requirements and gradual economic slowdown have collectively diminished the competitive advantage of Chinese banks versus its EU competitors. Study concludes that financial stability in China has been negatively impacted over the course of last five years and that the ongoing reform of the country’s financial safety net is both timely and needed.