Research On The Influence Led By Shadow Banking To Stability Of Commercial Banks In China

Paul Mcculley, the director of Pacific investment management company in United States put forward the concept of shadow banking in2007, shadow banking usually refers to non-bank financial institutions who are not in the scope of regulation, but exercise the function of the bank. Shadow banking began in the United States in the1970s with the development of securitization of housing loan, after entering the21st century, under the influence of a series of financial innovation, global integration, etc., the form of shadow banking is becoming more and more various, and the scale is also expanding rapidly.After this concept proposed, the study have increased a great deal, and with the deepening of research, academics recognize that the shadow Banking characterized by highly leveraged transaction, maturity mismatch, information opaque, avoid regulation etc, these characteristics will lead to liquidity risk, in turn, influence the stability of the commercial banking system, the financial crisis of2007is the best explanation.But according to situation of our country, due to the limited degree of financial openness, the specific construction form of shadow banking have great differences compared with Europe and the United States and other countries, commercial banks is just one part of shadow banking intermediary system, but most of the shadow banking business in China are around commercial bank, which is the core of shadow banking. Commercial bank will be affected by the shadow banking, to study the nature and degree of this influence, for china characterized by the main bank financing pattern, the significance is self-evident.Compared with the previous literature, this paper’s main innovation mainly displays in the following points:first, break through the past studies of shadow banking focus on theory, using loans coefficient method to measure the specific size of the shadow banking in China, empirically research on the influence of the stability of the banking system, secondly, this article selects the macro economic and financial environment, operation of bank to compose the index, quantify the stability of the banking system.Based on a series of research of the definition, form, function of shadow banking, analyze the relation between the shadow banking and stability of commercial banking, and provide the empirical basis for how to regulate shadow banking in our country. Trains of thought are:present situation and the description of theory-data processing-the empirical research. The study constituted by the following six parts:The first part of this article is introduction which stated the background, significance, method. Based on the introduction of the background and significance, the article gives the definition and form of shadow banking in the first. The shadow banking system, is also known as the parallel banking system, refers to a system of financial credit intermediary similar with the traditional commercial banks, and to convert the credit, maturity and liquidity, but without support of the central bank or credit liquidity of government, and rarely be regulated or not be regulated. Then, this paper introduces the shadow banking system in the United States, points out that the core of the system is asset securitization, asset securitization promote the development of the shadow banking, but also makes the shadow banking become fragile, which triggered the financial crisis in2007. And because of the different degree of China’s financial development, the composition of shadow banks is different in china, and the shadow banking in our country also characterized by maturity mismatch and higher default probability of risk, commercial bank plays an important role in the shadow banking business, and the shadow banking influence commercial banks for better or worse, commercial banks in our country occupies an irreplaceable position in the economy, as a result, research on how the shadow banks affect commercial banks becomes more important.The second part is research overview and research mentality. Firstly, this article introduced the literature about the stability of commercial banks at home and abroad, foreign research has experienced a transformation from the endogenous mechanism to exogenous mechanism, at the early of the study, scholars mainly looking for factors affecting the stability in internal commercial banks, the Asian financial crisis in1997, makes the scholars seek from the outside of commercial banking system, our country’s research is also starting from the crisis of1997. Secondly, this article introduces literatures about relations between the shadow banking and stability of commercial banking, centered on the shadow banking negative impact on the stability of commercial banks, our country’s scholars also makes a deep research on the relationship from different angles. But all the research mainly focus on the theory at home and abroad, empirical articles are less.The third part is the overview of shadow banking, introduces the shadow banking from five aspects:the definition, background, operation process, reasons for regulation and classification. Firstly, this paper reviewed the existing definitions, and then puts forward my own definition based on four aspects:the relationship with traditional Banks, function, degree of supervision and the nature. In terms of background and cause of shadow banking, development of shadow banking abroad is mainly due to the innovation of money supply components, regulatory capital arbitrage, information asymmetry, profit-driven, credit rating company, the domestic is different, liquidity, control of currency prices, government guarantee, credit control and slowing economic growth are the main reason.,Thirdly, this paper carried on the detailed explanation of the whole process of the shadow credit intermediary, and analyzes the three core system arrangement, money market mutual funds, asset securitization, repurchase agreements, to guarantee shadow banking operate smoothly, and then simply introduce our shadow banking credit intermediary in our country. Fourthly, this paper illustrate why regulate shadow banking from the assets, liabilities, operation of the shadow banking. Finally these articles classify the shadow banking from the perspective of originator and credit intermediary.The forth part analyze the relation between shadow banking and stability of commercial banks in theory, due to the importance of banks in the financial system and complication of bank risks, the measurement of stability become more and more important, the innovation of the foreign scholars is more in the measurement, but to sum up, the measurement mainly divided into two categories:qualitative measurement and quantitative measurement. Qualitative indicators can’t get away from its inherent defects, limit the bank stability on a narrow range, and can only explain the stability of a single bank, due to extensive connection between banks, so it’s not correct to measure the systemic risk of the entire banking system. In order to get rid of the inadequacy of qualitative analysis, scholars put forward a series of quantitative models to measure the bank stability, but most of these models are based on a reality, that is, the country had occurred a massive wave of banking crises before, so these models are not completely adapt to our country. Based on the reference of foreign scholars in the process of index selection, common experience and relevant research results, China’s actual national conditions and data availability, we selected three level and ten indicators to measure the degree of stability of Chinese commercial banks from macro economic and financial environment, the bank operations. We found that our measure of bank stability better describes the actual situation of our country’s commercial bank. Then I introduce the stability theory of the relationship between shadow banks and commercial banks.The fifth part empirically test the relation between shadow banking and stability of commercial banks. The first block of this part introduce the specific composition of shadow banking, in view of the limitation of various factors, this paper use sum of folk finance, trust loans and entrusted loans to represent the size of the shadow banking. The second piece is empirical analysis, the empirical results show that the scale of the shadow banking is the cause of the commercial bank stability; the scale of the shadow banking has a positive role in promoting stability of commercial banks. The third block analyze the empirical results in theory, analysis why the shadow banks have a positive impact on the stability of commercial banks from three levels, the commercial bank stability have no obvious change on the influence of shadow banking is mainly due to China’s long-standing financial repression. The fourth block is summary, this paper argues that we should not blindly accept the negative understanding of shadow banking abroad, and should face up to the positive effects of the shadow banking, and we should also pay attention to the high cost of financing within shadow banking, to avoid the emergence of the "ponzi scheme".