The Research On Regulatory Framework Of The Shadow Banking System

The "shadow banking" is propose by USA Pacific Investment Management company executive director Maikali(Paul Mc Culley) in 2007.It refers to the financial institutions that not belong to the regulatory system,and the function of the shadow banking is provide credit and financing. In 2007, the financial crisis outbreak from the USA and spread to the global, which the huge scope and the deep extent is very rare in history. The initiator of evil of this financial crisis is the shadow banking system. The shadow banking syetem has the characteristics of the opacity of information and high leverage, so there is a big inherent risk. Risk conduction between the interior of shadow banking system with between the shadow banking system and the commercial banking system is the root of the global financial crisis. The outbreak of the financial crisis make regulatory institutions of lots of countries and experts begin to examine the domestic financial system. Lots of countries begin study carefully the operation mechanism of shadow banks and risks.They try to establish the new regulatory framework,aiming at make risk and frequency minimal.China’s shadow banking system start late. But,as the economy develop rapidly, and government adjust country economic restructure,promoting industry of growing demand for funds. China’s shadow banks system develop very fast. The occur and development of China’s shadow banking system provides enough investment to all industries,and push the traditional commercial bank constantly update financing products, promoting the economic development of our country. Although the shadow banking system has many advantages, but we cannot ignore its underlying risk. The primary risk is a ticking time bomb, can bring the financial crisis beacuse economic fluctuation.Thus,these drawbacks can block regulatory authorities effectively use monetary policy to control financial environment. So the regulators need to enact specific regulatory measures to regulate the operation of the shadow banking system.In view of the shadow banking system risk of conduction and the experience the foreign shadow banking regulatory framework and our country’,this paper will discusses how to construct and complete the shadow banking regulatory framework in China in two parts: regulation principles and regulation measures. Regulation principle is the core of a regulatory framework, throughout the various parts of the shadow banking regulatory framework,can govern and guide the construction of a perfect shadow banking regulatory framework. So, the first part discusses the specific regulatory principles that should be established: the principle of focus,the principle of proportion, forward-looking and flexible principle, the principle of uniform validity, the principle of regularly evaluating regulate effect. Under the guidance of the principle of regulation,the second part puts forward some specific measures to construct of a regulatory framework:(1) To construct macro-prudential regulation framework, give authority to the central bank.(2) Prompt the shadow banking system to establish perfect mechanism of self-discipline.(3) Improve the information transparency, the establish the risk detection and early warning mechanism.(4) Participate in international financial regulatory cooperation, actively prevent and response to the external risks.(5) Vigorously promote the financial innovation and the development of asset securitization.(6) Strengthen the protection of consumer interests, improve the financial regulation law system.