The Regulatory Effects Of The New Asset Management Regulation On The Shadow Banking System

The 20th Party Congress report pointed out that modern financial supervision should be strengthened and improved,the financial stability protection system should be strengthened,all types of financial activities should be brought under supervision in accordance with the law,and the bottom line of no systemic risk should be guarded.2023 Work Conference of the China Banking and Insurance Regulatory Commission(CBIRC)thoroughly implemented the requirements of the Party Central Committee and proposed to resolutely prevent and resolve major risks in the financial sector,especially to strictly prevent the resurgence of various types of highrisk shadow banks and to solidly promote After the financial crisis in 2008,China’s shadow banks developed rapidly.Due to the influence of China’s financing structure and financial environment,China’s shadow banking system is bank-led,with non-bank financial institutions as the carrier,and has developed rapidly and expanded disorderly with the help of regulatory gaps.Various types of financial risks have been accumulating and the problem of violations of law has become increasingly serious,greatly distorting the effective allocation of market resources,and seriously threatening the high-quality transformation of China’s economy.To comprehensively bridge the regulatory gap and curb the disorderly expansion of high-risk shadow banks,the new regulations on asset management were formally introduced on 27 April 2018.As the first unified and strong regulatory policy for the asset management industry and a milestone regulatory policy in China’s shift from sectoral regulation to mixed sector regulation,the New Regulation on Asset Management coordinates the balance of stable growth and risk prevention to maximize policy effects,extending the one-year transition period to formally wind down at the end of 2021.Clarifying the regulatory impact of the new regulations on the shadow banking system during the transition period is not only conducive to the positive effects of shadow banking credit supplementation,risk pricing and maintenance of financial stability,but also plays an important role in regulating financial institutions to strengthen their efforts to serve the real economy,improve the efficiency of market resource allocation and enhance the level of risk management.This paper firstly compares the relevant academic studies on shadow banking and the new regulations on capital management.Then,based on the history of the development of shadow banking in China,the background of the introduction of the new regulation on capital management,specific requirements and relevant theories of financial regulation,the regulatory impact of the new regulation on shadow banking is analyzed from the perspective of commercial banks at the micro level.In the empirical analysis stage,we construct a fixed-effects model by measuring the scale of shadow banking of micro commercial banks and find that the scale of shadow banking in the banking system has significantly decreased after the implementation of the new CRA regulations,effectively suppressing high-risk shadow banking.Secondly,constructing a generalized double difference model for differential analysis found that banks with high shadow banking scale experienced an increase in the level of bank risk and full exposure of hidden non-performing assets after the implementation of the new regulations on capital management.Further tests found that the impact of rising risk levels in banks with high shadow banking size after strong financial regulation was significant among smaller banks,while banks’ capital,provisioning and profitability advantages could effectively defuse risk exposure after strong regulation,and diversification of business income structure would strengthen risk exposure after regulation.This paper provides micro-level evidence from the banking system on the effectiveness of the new capital management regulations in dismantling risky shadow banks.As small-scale banks have weak risk management capabilities,insufficient capital,provisioning and profitability are more affected by the new capital management regulations.Strengthening the liability business entrepreneurship,non-performing assets disposal capability and active risk management capability of small and medium-sized banks to prevent the evolution of shadow banking risks is the focus of the new capital management regulations to continue to address shadow banking risks.Therefore,although the new capital management regulations have effectively reduced the scale of shadow banking,it is necessary to coordinate with relevant institutions,continue to differentiate dynamic supervision,strictly prevent the "short board effect",strictly prevent the resurgence of high-risk shadow banking,and continuously improve the modern financial supervision system to promote high-quality economic development.