Research On Legal Regulation To Shadow Banking In China

Shadow banking was brought out by McCauley, the executive director of PacificInvestment Management Company. It carries out the similar function of traditionalcommercial banks, providing liquidity and credit, while it is rarely regulated recently.Shadow banking brings serious systematic risks to the financial system because of itscharacteristics of high leverage, maturity mismatch, and its close connection to thetraditional commercial banks, which makes it the main source of global financialcrisis in2007. Now, how to effectively and legally regulate the shadow bankingsystem has become the working focus of financial regulation in each country. Theprecondition of legal regulation is determined regulation object. The concept ofshadow banking is brand-new. There is no unified and authoritative definition ofshadow banking even with extensive discussion. However, it is a common opinionthat the nature of shadow banking is a kind of Non-bank credit intermediary. At themacro level, shadow banking could satisfy the commercial needs, boost financialmarket and promote financial reform. At the micro level, i t could diversify risks andreduce costs. Nevertheless, it brings certain risks, such as regulatory arbitrage,systematic risks, financial fragility, and damaging the efficiency of macroeconomicregulatory. Effective legal regulation can bring the superior ity of shadow bankinginto full play and limit its risks. Some international organization and countries havecarry out some legal regulation to shadow banking, which provides references to thatof Chinese shadow banking. In china, the legal regulation to s hadow banking hasstarted, but there are still some problems. The regulators keep emphasizing thenecessity of legal regulation to shadow banking and take some measures. However,there exist some problems such as imperfect legal system, regulation vacuum a ndoverlap, and overly strict Administrative financial regulation. In order to make theshadow banking regulated, the right regulation principle should be stocked andhigh-efficient regulation pattern chosen. The subject, objects and main points shouldbe determined and relevant laws and regulations drafted.