Research On The Influence Of Shadow Bank On Commercial Bank Credit Risk Management

After the 2008 financial crisis, the shadow banking system became an issue of great concern. The scale of shadow banking in China has undergone a rapid growth in recent years, causing more and more attention. With a relatively low degree of China’s financial marketization, the starting process of interest rate liberalization, and a separate management and separate supervision mechanism, to some extent the financial environment is the resource power of promoting the development of the shadow banking. Most of the existing literature about the domestic shadow banking system is the on the study of the regulation of shadow banking risks, very few of them is on the shadow banking credit risk management of commercial banks. There are even less research literature studying shadow banking regulatory measures from the perspective of commercial banks.This paper, with a main line of credit risk management, begins by reviewing the relevant literature and theory of credit risk management and the shadow banking in recent years. On the basis of the analysis of modern credit risk measurement and credit derivatives credit risk transfer mechanism, combined with the actual situation of China’s shadow banking, an empirical analysis of the shadow banking’s effects on the credit risk management of commercial banks is employed including a U.S. bank holding companies panel data of quarterly financial statements and credit default swaps holdings from 2008Q1 to 2012Q4. By using unit root test, cointegration test, Hausman test and the F-statistic test, the specific type panel data model to analyze effects of the credit derivatives trading on credit risk management is determined. The empirical results show that:credit default swaps has no significant impact on the credit risk management of the bank holding company. The reason, on the one hand, the bank holding company with "purchased credit protection" may have distorted incentives, to lower their standard to issue loans, and are more incentive to take higher risks. Credit derivatives, on the other hand, rely heavily on modern risk measurement tool, while these tools have little measures of changes in the financial environment affecting the credit risk. And credit derivatives’ essence is to spread the transfer rather than eliminate credit risk.On the basis of theoretical analysis and empirical analysis, this paper pointed out that the extensive use of credit risk transfer instruments led to the rapid expansion of credit risk, planted the seeds of the financial crisis. In China, commercial banks dominant financial products of the shadow banking system and have benefited most. Regulatory authorities should regulate and control over the market from the point of view of the capital, the scale, and the real transfer of risks, and strive to improve the country’s financial mercerization, in order to make full use of the advantage of the shadow banking and avoid the associated risks at the same time.