A Study On The International Shadow Banking Supervision

Shadow banking became an important financial concept after subprimemortgage crisis in America. It was a method that used securitized bank loans to makeunlimited credit expansion. Different from the traditional banking system, shadowbanking turned this traditional banking credit relationship into another kind of creditrelationship which hid itself in the course of securitization. This relationship lookedjust like belonged to traditional banking system, but what it had was only its functions,not including its organizations. Hence, shadow banking was just a shadow of thetraditional banking system. It had certain unique characteristics: high leverage ratio,wholesale business model, opaque information, lack of supervision. Thesecharacteristics made systematic risk and regulatory arbitrage more easily happen.This paper did a horizontal comparison about shadow banking supervision from theperspective of legal regulation.In the first part of this paper, the author clarified the goals of shadow bankingsupervision: reducing the possibility of systematic risk and regulatory arbitrage,realizing the harmonization of financial supervision and financial innovation. Shadowbanking was the product of financial innovation, for the lack of regulation, it madethe systematic risk and regulatory arbitrage more easily to happen, the harmonizationof financial supervision and financial innovation was also hard to realize. So thetargets of shadow banking supervision were to solve this three problems.The second part of this paper talked about the targets for monitoring. The authorfirstly had an analysis about the concept of shadow banking, scholars at home andabroad had different opinions about the concept of shadow banking. The authorthought that FSB’s definition was authoritative and worth learning. Next, the authorhad a general description of the shadow banking system, it was the exactly reasonwhy systematic risk and regulatory arbitrage were more easily to happen. At last, theauthor mainly had a discussion about the targets for monitoring in some countries anddistricts from the perspective of extension, the supervision legislation had some conclusions about this problem.The third part of this paper was mainly about the supervision agencies. Theauthor chose America, England, European Union and China as the representative todo this research. The research included the supervision agencies, the assignment ofsupervisory power and the reasons of differences. Because the level of prosperity offinancial markets and the financial supervision system were both different.The forth part of this paper was about the content of shadow bankingsupervision reform in the above countries and districts. This part included many lawsand regulations on shadow banking supervision of the countries above mentioned, theauthor made some classification. American enacted four acts in all, Blueprint For AModernized Financial Regulatory Structure on March,2008; Treasury OutlinesFramework For Regulatory Reform on March,2009; Financial Regulatory Reform: ANew Foundation on June,2009; Dodd-Frank Reform on July2010. All the Actsabove highlighted the importance of shadow banking supervision, and now all thefinancial activities in America have been brought into the range for monitoring. InEngland, the relevant documents were： The Turner Review on March,2008;Derivatives OTC Market Reform on December2009. In EuropeanUnion, the relevantdocuments were: the Alternative Investment Fund Managers in2010; CRD Ⅱ(2008),CDRⅢ(2009), CDRⅣ(2010); Green Paper Shadow banking(2010). Ourcountry had not yet officially promulgated relevant laws, but there were twonotifications: General Office of the State Council, the notification about strengtheningShadow banking Supervision in2013; China Banking Regulatory Commission,regulating the investment and operation of Commercial Bank financial services in2013. They represented the tendency of our country’s shadow banking supervision. Inaddition, FSB released a series of reports in2011: Shadow banking, Scoping theIssues; Shadow banking: Strengthening Oversight and Regulation; Shadow bankingSystem: Progress and the Next step. FSB’s suggestion was the tendency of the futureInternational shadow banking Supervision. The author thought that although Chinahad no officially laws and regulations about shadow banking supervision, but the twoNotes represented the tendency of our countries’ shadow banking supervision. At themeantime, we could learn from the developed countries and FSB about their successful experience, but we must combine with national conditions.