Research On Shadow Banking Risk Conduction Mechanism Based On Complex Financial Contract Networks

The Shadow Banking System was first put forward by financer Paul Mcculley. Because it plays a similar function with the bank, it is also known as a Parallel Banking System. The Shadow Banking Business possesses the characteristics of high leverage and covers almost the entire financial sector. So the rapid expansion of the current domestic shadow banking business probably causes instability to the entire financial system, the shadow banking system is highlighted by the money drought event of the banking system and caused prompt attention from all aspects. At the same time, how to control the risk of the whole financial system caused by shadow banking has become an urgent problem to the financial sector, while making clear the risk conduction mechanism of the shadow banking business across the financial system is one of the key problems.By searching the literature, the shadow banking system, the content of the shadow banking, the shadow banking risks conduction, complex networks and the brittleness of a system are elaborated; the research status of domestic and foreign scholars in the shadow banking and risk conduction field are summarized. And from the perspective of commercial banks, with the help of complex networks and related computer software to solve the problem of shadow banking risks conduction. According to previous research results of the scholar, a structural equation concept model of shadow banking risks conduction is summarized. Using the data obtained by questionnaire was to test the model. Under the background knowledge of many disciplines, this paper uses the literature search, complex networks, related application software, structural equation modeling and survey methods to solve the problem of shadow banking risks conduction innovatively.Firstly, through a method of the business flow chart, this paper straightforward analysis the contents and its risk types of the shadow banking, which are engaged by commercial banks and whose risks are relatively large. And in accordance with the contractual relationship between the commercial banks and shadow banks and the internal shadow banking system, the financial contract network is constructed. Then by using UCINET software the characteristics of the network are analyzed.Secondly, combined relevant research findings, a research model of shadow banking risks conducting is summarized, then by the method of structural equation modeling a conceptual model of shadow banking risks conducting is constructed. Through questionnaires 311 empirical data is acquired, and then use SPSS and LISREL software to test, fit, adjust and correct the model. Finally, according to the last tested model and the flowchart of shadow banking, methods and measures to control shadow banking risks conduction are proposed. Finally, the conclusions of this study are confirmed in the form of real cases.Through the research, the following findings and conclusions are obtained.(1) From the perspective of commercial banks, five shadow banking business are summarized, which possess the relatively large risk. Five shadow banking business include silver letter wealth management business, entrusted loans business, credit asset securitization business, private equity fund business and private lending business. And by using the business process diagrams, the operational procedures and possible risks of the shadow banking are elaborated concisely.(2) Financial contracts network based on the shadow banking business possesses complex feature. It regards the shadow banking financial institutions as the nodes and the contractual relationship between them as edges to build a network. Through analyzing characteristics of the network, it makes to know that the network has a small-world and scale-free feature, which shows financial contracts network based on the shadow banking own complex features.(3) Two potential paths and five factors of the shadow banking business risks conduction are obtained. Potential risk conduction path is the real economy and the virtual economy path. In these two paths five factors are extracted, namely the level of the lack of government supervision, the level of economic basis recession, the shadow banking financial frangibility, the shadow banking system frangibility and commercial bank funds brittleness.(4) In the sources of shadow banking risks generated, the level of economic basis recession significantly affects the shadow banking system frangibility and commercial bank funds brittleness, but its influence is far less than the role to the shadow banking financial frangibility. The level of the lack of government supervision has significantly positive effects of the shadow banking system frangibility and commercial bank funds brittleness, but it has significant negative effects of the shadow banking financial frangibility. The shadow banking financial frangibility has significant positive effects of the shadow banking system frangibility and commercial bank funds brittleness, but it has more significant positive effects of the shadow banking system frangibility. The shadow banking system frangibility has no significant impact on the commercial bank funds brittleness.(5) From the last tested structural equation model of the shadow banking risks conduction and the flowchart of the shadow banking business, methods and measures of targeted and good feasibility to control risks are proposed. Institution can isolate possible risks of the shadow banking processes; strengthen supervision of commercial banks and moderately regulate capital flows of the shadow banking; strengthen risk early warning management of the real estate industry, strengthen internal risk control of the shadow banking; establish risk firewall between the shadow banking and commercial banks.Throughout the full paper the main innovations of the study are as follows:Firstly, it is relatively new that this paper studies the shadow banking business from the perspective of commercial banks. And the use of flowcharts innovatively show specific operational procedures of the shadow banking business.Secondly, this paper regards these financial institutions, which engage the shadow banking business, as a financial contracts network, through which to study the specific linkages between these different financial institutions. For the study of shadow banking business risks conduction, the propose and application of the complex financial contracts network is innovative.Again, from the two potential paths of shadow banking business risks conduction, we introduce the concept of frangibility when summarizing factors of risks conduction, which has important significance for the study of shadow banking business risks conduction.Finally, in the model validation process we negate some of the traditional view. Before testing the model we think the shadow banking system frangibility can produce an important impact on commercial bank funds brittleness, but the validation results show no significant effects between them.