Research On Supervision Mechanism Design Of Shadow Banking For Commercial Banks

Since American subprime mortgage crisis occurred in2008, risk and supervisionof shadow banking have drew great attention all over the world.In consideration oftheir own business development, China’s commercial banks launched a lot of theshadow banking business that the rate of return on investment are higher than thetraditional deposit business of commercial banks,and be expanded rapidly in a shorttime. Through the use of commercial bank credit intermediary role,these shadowbanking provide the possibility of leverage and maturity transformation for financingactivities,many of their transactions in ways that do not show up on their balancesheet accounting and so are not visible to government supervision department,whichaccumulates a large amount of financial risk and endangers the stability of the entirefinancial system. Therefore, it is necessary to strengthen the supervision of shadowbanking for commercial banks. In addition, as a kind of financial innovation, shadowbanking for commercial banks reflect the supply and demand from financial marketobjectively.Therefore,the government supervision department should realize therationality of its development and whether have been separated from the entityeconomy,in order to promote its healthy development well by prudential supervisionand financial innovation.This thesis regards the regulatory process in shadow banking business ofcommercial banks as the research object.Firstly,it eaborated the meaning andcharacteristics of this business, and discussed about typical business as Bank andCredit Cooperative、financial products and Entrusted Loan in detail,then analyzed thecurrent regulation situation and serious problem of this business in ourcountry.Next,according to the above problems in the Chinese shadow banking systemand regulatory theory of shadow banking from the western developed countries, thisthesis established the evolutionary game model between commercial banks andregulators based on innovation behavior of the shadow banking business withevolutionary game theory,and analyzed the regulatory equilibrium.Based on theequilibrium results,the research designed incentive and restraint mechanism withprincipal-agent theory in order to encourage regulators of shadow banking business to work hard and improve the efficiency of supervision thoroughly.Finally,the researchbuilt prudential regulation mechanism based on pre-commitment approach aboutshadow banking business to make the regulator strengthen incentive for this businessoperators.The behavior of regulatory should meet operation target of shadow bankingbusiness so as to promote the commercial banks to obey the regulation well. Thespecific conclusions are as follows:First,according to the characteristics of shadow banking business,the researchestablished the evolutionary game model between commercial banks and regulatorsbased on innovation behavior of the shadow banking business.For the commercialbanks,if it gets much more positive reputation benefits θwhen complied with thelegal norms and punishment F from regulators because of illegal innovation onshadow banking,while the cost of preventing risk C1is a little,then the commercialbanks will tend to innovate legally for shadow banking business to promote thehealthy development of it;For the supervision organization,if it pays less cost ofregulation C2,while gets much more invisible benefits M after supervising andpunishment D from the superior government department when the security problemoccurred,then the supervision organization will tend to work seriously so as to controlrisk of shadow banking business effectively.Second,the incentive model of shadow banking supervisory staff is establishedby government department. Under the condition of symmetric information, shadowbanking supervisory staff do not assume any risk and their income is equal to theretain income plus the effort cost;but under the condition of asymmetric information,supervisory staff need to take some risks and the level of their efforts and fixed salaryare less than the situation of symmetric information,so does the expected revenue ofgovernment.Therefore,it is necessary to design the corresponding incentive scheme inorder to promote supervisory staff to choose the optimal effort level and putaccountability system to evaluation of shadow banking supervisory staff.Third,the benefits of government and shadow banking supervisory staff are allrelated with the comprehensive quality level of supervisory staff and system risk,asthe same time these factors have an affect on rational behavior and decision of bothsides.A supervisory staff with high quality level can not only improve the expectedreturn of government but also increase their income, thereby achieve the government’sregulatory goal that supervisory staff will try their best to check illegal innovationbehavior. Therefore,regulator should focus on improving the comprehensive quality of supervisory staff to make the response for the development and change of shadowbanking business.Last,the research put shadow banking business of commercial banks into prudentialregulatory framework,built the prudential supervision mode for shadow bankingbusiness based on pre-commitment. Prudential regulation mechanism of shadowbanking business should be set up on respecting for operational autonomy ofcommercial banks,avoiding excessive intervention and control,and in the areas ofbusiness innovation and pricing should also be given enough freedom. In addition,supervision organization need to formulate the minimum prudential operationalstandard for shadow banking business in order to make sure that commercial bankscarried on business carefully during the daily operation.