The Analysis Of The Potential Risks And Regulatory Countermeasures Of Share-holding Commercial Banks’ Innovative Off-balance Sheet Activities

Since the2008global financial crisis, the global economic recovery is difficult and tortuous, and it still maintains slow growth. The fiscal risks and the financial risks of major developed economies have not been effectively alleviated. New economies have had slower growth. International financial markets have increased volatility. The global capital is frequently flowing. These have objectively caused that the domestic economic development must respond to the more complex external environment. The domestic economic development is facing both opportunities and challenges. In general, it shows a good development situation:overall macroeconomic stability, the continuous promotion of financial reform, the growing strength of financial institutions, the rapid development of financial markets, the significant results of financial infrastructure, and the overall stability of financial system. In this economic and financial situation, in order to reduce the impact of the negative factors of "Empty Profits", domestic Share-holding Commercial Banks (SHCB) have actively carried out financial innovation which has led to innovative Off-balance Sheet (OBS) activities to develop rapidly. These factors include the limitation of the development of total assets caused by control over scale of bank credits, the negative effects of interest rate mercerization reform, the accelerating trend of "Financial Disintermediation", and capital rationing oriented supervisory regime.With the constant deepening of financial innovation and financial reform, the importance of OBS activities is gradually increasing. The OBS activities have had a development trend which can keep pace with the development of the traditional business of the assets and the liabilities of commercial banks. The domestic banking and the academia have carried out many remarkable researches on the OBS activities. However, these researches are inadequate because the traditional OBS activities are more concerned while the innovative OBS activities are less valued; and the development and the risks of the overall OBS activities of banking are explored too much while the development and the risks of the innovative OBS activities of SHCB are analyzed too little. In fact. Year2009has become the watershed of the domestic development of OBS activities. Before Year2009. the development of OBS activities was relatively slow. However, after this year, the OBS activities developed quickly. Especially since Year2011, the development of the innovative OBS activities of SHCB has been like an uncontrolled blowout. It is compatible with the background that a stable monetary policy has been continuously conducted in China; and financial system reforms including interest rate mercerization and the establishment of modern financial enterprise system have been constantly implemented. Additionally, this blowout development will not stop in the short term.In this thesis, the innovative OBS activities of SHCB have been researched. The development, the supervision and the control of OBS activities of foreign commercial banks have been briefly summarized. Case analysis has also given us lessons and inspirations. The core content is that the development of OBS activities of domestic commercial banks has been analyzed, and the potential risks, the supervision and the control of the innovative OBS activities of SHCB have been discussed based on its case analysis. Based on the above analysis, the basic conclusions will be drawn:In the system of the business division operation of banks and the business division supervision and management of government authorities, the innovation and the use of financial derivative tools are still at the relatively early stage. The innovative OBS activities will still take time to become the pillar business of whole banking sector. Moreover, the domestic financial system is overall stable and its risks can be basically controlled. However, in most cases, the innovative OBS activities of SHCB are generated simply to avoid regulation. The credits created by this business are divorced from supervision. It has affected the accuracy of social financing scale monitoring and even affected the overall situation whether the stable monetary policy can be effectively implemented in China. Therefore, in order to promote the healthy development of the innovative OBS activities of SHCB, the regulatory countermeasures which are proposed to be taken have been emphatically analyzed by improving the external regulation and strengthening the internal management in the last part of this paper.