The Challenges Of The Shadow Banking System Development On Our Country’s Monetary Policy

The shadow banking system, refers to the non bank financial system which is free of the policy supervision, but playing with the commercial bank the same function. Financial institutions and government departments jointly promote the development of shadow banks. In the1990s traditional commercial banks breaking the legal limits of separate operation and supervision, won government lax regulatory environment, and applied mathematics and computer aided tool, innovating large quantities of OTC instruments and institutions. At the same time, investment banks, hedge funds, money market funds and other institutions also strengthen cooperation with commercial banks, gradually which established the shadow banking system. Shadow banks create huge profit, while contain tremendous risk. The outbreak of the Subprime crisis makes people begin to recognize the shadow banking. Since then, the academic circles start to study shadow banking system, and each country also examines their country, exploring the method of controlling shadow banking system.China shadow banking is still at the primary stage of development, mainly for supplying commercial bank financing function. But it also has its own characteristics. Firstly, the shadow banking is around and relying on commercial banks, mainly divided into the "internal" shadow banking sub-system, the "external" shadow banking sub-system and the "internal and external" integration shadow banking system. Secondly, on the causes, monetary policy fluctuation, commercial bank behavior, and narrowly investment channels stimulated the development of shadow banking system. Thirdly, in the creation of credit, our country lacks of securitization mode, so the shadow banking system accelerate the capital turnover, but rarely directly increase the money supply.But China’s shadow banking system also affects the national macroscopic policy regulation, especially challenging the implementation of monetary policy and regulatory. Our country is in the economic shunt period and monetary policy system still exists some problems. Shadow banks farther disrupted regulation mechanism:reducing intermediate target of monetary policy of testability, controllability and the correlation with the ultimate goal; weakening the forces of the legal deposit reserve, rediscount, open market operations and other tools; blocking the conduction of monetary policy. Therefore, our country must follow the market requirement to improve the monetary policy system, from monetary policy target, tool of monetary policy, transmission mechanism three aspects, improving the monetary policy effect.