Research On The Risk Of Shadow Bank In China

The global economic crisis of 2008 has brought a very serious impact on many countries. In order to avoid the great depression, many countries have taken a proactive fiscal policy and loose monetary policy. Today, however, the side effects of the financial crisis has not completely disappeared, relief policies have not brought economic prosperity, but wave after wave of crisis aftershocks. From the U.S. fiscal cliff, the debt crisis in Europe to China now faces the shadow banking risks, the aftermath of the financial crisis continues. Many domestic and foreign academics and practitioners experts have pointed out that the main risk for China’s economy is from the shadow bank, the local debt crisis and the real estate bubble, while local debt crisis and the real estate bubble have links with the shadow bank. We can say that the shadow bank’s risk management and control have become the most serious challenges of our country’s economic health.Shadow banking in countries with mature capital markets and the financial system is very prosperous. There is a lot of differences compared with our shadow banking system. This is because China’s financial regulators have been taking very cautious principles for financial innovation which has very strict limits, attaches great importance to the leverage ratio limit management. And our regulatory legislation did not fully liberalized market access for financial innovation and product implementation. Of the shadow banking system compared with foreign operations with a relatively simple, low level of complexity of the product structure, leverage is low, but the body has a unique form of expression. Therefore, China’s shadow banking system is still in its early stage of development. Nevertheless, in recent years, the development of China’s shadow banking has shown burgeoning and uncontrolled trend, and traditional commercial banks, government financing platforms, real estate and even large state-owned enterprises are too closely associated with it. China’s regulatory authorities gradually pay attention to these types of Chinese-style shadow banks.In this paper, starting from the Chinese-style shadow banking system, with its main representative "trust" for example, I studied the shadow banking development in our country. And analysis liquidity risk and credit risk of the nowadays Chinese-style shadow bank through the recent crisis-prone cashing case of the trust industry. Then give the suggestions of how to control the risk of China’s shadow banks from the regulation angle.The main subject of this paper is divided into four parts. The first part reviews the theory of shadow bank. Interest rate liberalization, financial disintermediation and financial innovation have contributed to the breeding and development of shadow bank especially under relatively unique conditions of our country. Then review the definition and content of the shadow bank in the domestic and foreign research, and clear the "shadow banks" in this article by the method of literature review.The second part of the main manifestations and the basic characteristics of the shadow banking, introduces the development status of "trust" is a typical representative. Trust industry in recent years show explosive growth, and a breakthrough of ten trillion in 2013, accompanied by the frequent risk and increasingly severe risk regulation. This part also for the Trust focuses on the type of business association whose principal business bank letter of cooperation with our shadow banking system, and summarizes the development of the shadow banking supervision system.The third part is a case study. It analyze transaction structure, the parties’ conflicts, risks and bundled solutions of this product starting from the case of "honest to open on the 1st Gold" crisis. This is a very typical channel business. Trust is a way of bank-trust cooperation. Through this way, trust gradually becomes typical shadow bank. And the case reflect business problems and risks inherent in the trust industry at this stage, it makes us think about the possibility of systemic risk of Chinese-style shadow bank. Cashing crisis of trust industry occurs frequently, either the upper regulators or the financial institutions are generally recognized that is not conducive to long-term development of the real economy and the financial markets by blindly fallback. By the case we can see that Chinese-style shadow banks will tie up banks, government and corporate which hiding enormous potential systemic risk. Therefore, we need to fully understand the risks of the shadow banking, and make a legal, scientific, rational and effective regulation.The last part is about how to identify Chinese-style shadow banking risks embodied in the case. And classify that there is a large shadow banking regulatory loophole, and interfere with some country’s regulatory policies. There is a credit bundle in business process, and do harm to financial stability. Another part of the contents propose risk control measures from a regulatory point of view. It considered necessary to strengthen the development of laws and regulations, and make changes in regulatory thinking, improve the information disclosure policy. Only guiding the healthy development of Chinese-style shadow bank from the level of supervision can shadow banks be able to make more to play its positive role.This study hopes to provide useful meanings on Regulation of shadow banks.