Research On The Shadow Banking Products Effect On The Stability Of The Financial System

In2007, the U.S. financial crisis has caused heavy impact on financial products and its mediation.Since the crisis, the study of the causes of the crisis, the results and influence on mechanismhas gradually become a focus. In the study,financial products and its intermediary structure was named as "shadow banking system".Being an emerging liquidity and credit creation system,the shadow banking system is closely combined with the traditional banking sector and function approximation,but it also has not directly absorb deposits, high leverage, almost is not affected by the country’s financial safety regulation, period mismatch of assets,trading chain complex as its characteristics.The American financial crisishas had a profound impact on the world economy and financial system. Financial innovation activitiesimpact onthe financial intermediary sector functionand thesecurity settings much more great than before. Shadow banking system as a series of mutual transformation between market liquidity and bank liquidity financial innovation product and the market mechanism, study on this system is an important way to find the reason why crisis happened, and updatefinancial supervision method.This article focuses ondifferent financial products. We set up the subsequence that product study is given priority to, institution study relies on product study.Studies on the causes of this financial crisis have been the focus in the study of the shadow banking system.Many scholars have put forward different point of view and conclusion.The attention to short-term financial products can reflectthe structural characteristics of the shadow banking system.In the research framework of this article, we focus on the ABCP (asset backed commercial paper), repo (repurchase securities), MMMF (money market mutual funds) as the typical short-term financial products.ABCP in the traditional sense is considered to be "clear commercial bank liquidity options".Observation of the actual data can find that:although during crisis, bank lending is contracting, bond financing is on the rise.To ABCP products as observation object, the loans associated with bonds between the alternative model is established.Through observation of the non-financial sector flows into relationship, we established the household sector in the United States, the United States department of borrowers, European Banks as the main body of the global capital flow system, and completed the alternative analysis between loans and bonds. Andthis model offersa good fitting of this crisis.Repo isan important medium between securities and cash.Character of high fluidity, repo act as "cash" in the shadow banking system.Through the repo market mechanism, we can observation the shadow banking system internal product contagion effect andthe term mismatch.From the point of view of gametheory, the collapse of shadow banking system is the consequence ofdifferent restructuring mode selection during the crisis.Different underlying assets are the key factor whetherrestructuring is effective. Through the U.S repo market we established the mechanism of flee, andcombined with European repo market changesfacts, we can characterglobal repo market trading.We research relationship between the shadow banking system and the systemic risk through MMMF. MMMF’s different issue organization form can impact on its risk sharing mechanism. MMMF release can be divided into domestic issuing and offshoreissuing. Based on this form, we concern why organizational form, holders’ support and types can result different risk selection. Analysis results thatdomestic issuing MMMF regardless of their insurance mechanism set up situation, high profitability and high risk assets is its preference of asset types.Offshore issuing MMMF (represented by European offshore issuing MMMF) have high level of risk because they have no supportability. But the whole European MMMF contained high level of risk, offshore issuing MMMF’s risk is no significant.From the overall situation, MMMF’s based asset contains high risk level, in further marketing operation, supervisory authority should pay more attention on this kind of derivative.In the shadow banking system,MMMFgather scattered consolidated funds from traditional banks; securitization transfers traditional banking assets outside of bank balance sheet, increase liquidity in the market;the repo market make bonds into new forms of "money".Combination with the definition of shadow banking, we can see that the shadow banking system is based on securitization products like ABS, MBS,through ABCP, repo and MMMF; the system realized its liquidity and the transformation of the period.In the shadow banking credit intermediation process, there also have other derivatives like CDO, CDS.Through the chain of the shadow banking system,these products accomplishcredit creation process.Based on theresearch of foreignshadow banking system, we have experiences and lessons of the shadow banking system development in certain mastery.Then on this basis, we move to the Chinese financial intermediation innovation,puts forward suggestions and feasible method is also an important application of theoretical research.The U.S. financial crisis and the subsequent European debt crisis is a chance to innovate the former regulatory, and also a chance of China to develop our own financial products,improve China’s financial industry’s market position. This is also a chance to completeChina’s financial regulation and supervision.