The Legal Supervision Of Shadow Banking In China

Shadow banking exert a similar function of commercial bank,but that is a composed of little to no regulation credit intermediary institutions. Due to the fact that shadow banking especially in higher levels of operation, often and easily induces a mismatched deadline, which in turn causes high risk behavior in supervisory arbitrage. With the implementation of economic innovations, shadow banking has caused the economic market to become injected with new blood,and promotes the market economic reforms and concepts,but the benefits to the development of world economics are tremendous,and the risks to shadow banking cannot be ignored. In order to combat these risks, our country has adopted a cautious supervisory attitude. For this reason, in 2013 the state council appeared at the General Office and issued the “Notice of Some Issues of Strengthening the Regulation of Shadow banking”(abbreviated as article 107). This article besides categorizing shadow banking into three different types and addressed new supervisory requirements that would arise such as supervisory institutions, laws and regulations regarding shadow banking and also risk prevention. However, due to the fact that our country implemented a blanket policy on the vast system that is shadow banking and other numerous problems have also arisen. The supervisory problems of shadow banking still need to be clarified; for example, the first type of shadow banking is a financially unlicensed credit intermediary and a problem with them is that our country has yet to establish a consumer financial system from these unregulated shadow banking. The main supervisory subject remains unclear and still lacks a unified progressive supervisory statute or regulations. A problem with the second type of shadow banking is that those are unlicensed and with inadequate regulation is that they are without reasonable systems to monitor risk. Legislation with the second type of shadow banking is lagging. The third type of shadow banking is that those do have licenses, however they are lacking in regulation. Their main problems stem from internal policies that are not strict enough,and external information regarding them is scarce and the moment the situation appears to be grave. Presently, in order to rectify these problems that exist for our country regarding the aforementioned types of shadow banking, a new method of supervision needs to be attempted. A stronger control of risk, more refined laws and regulations and better interrelated institutions are all needed first and foremost. It is from both the general and individual supervision aspects for a increase in the supervisory statutes and regulations for shadow banking in our country to occur.