The Influence Of The Shadow Banking Scale On Regional Financial Stability

Since global financial crisis caused by United states subprime mortgage crisis in 2007,the shadow banking system has attracted great attention. The concept of shadow banking was firstly put forward by Paul Mulley who works in Pacific investment management company, which means non-bank institutions whose business are similar to the traditional banks’ but free from the banking system.Furthermore, in the early 1970 s, the shadow banking arose with the emergence of Securitization of housing mortgage loan in the United States, and then became an important part in the modern financial system with sustaining financial innovation. Nowadays, the shadow banking system develops rapidly in our country. According to the official statistical data in the most narrow diameter, the scale of the shadow banking in China reached 14.6 trillion yuan by 2012,which accounted for nearly 11% of total bank assets. On one hand, the shadow banking develops rapidly can promote the real economy so as to ease financing difficulties which SMEs facing; On the other hand, the shadow banking counts on its function of credit creation to have provided the society credit supply, which enlarges the actual supply, then makes it difficult for financial regulation and macro-control. In addition, a large part of the shadow banking comes from private lending through oral credit, which increasing credit risk. In the end, it will affect the stability of the entire financial system.In this article, I analyzes how the scale of the shadow banking affects regional finance stabilization within the scope of provincial based on ZheJiang province. As the scale of the shadow banking is disguised to some extent, it’s difficult to obtain statistics directly. I estimate its scale on the basis of other scholars’ research achievements. Then I choose two first-grade indexes include macro-economy and financial ecological environment, while first-grade indexes include 18 three-grade indexes in total, and build index system to evaluate financial stability, give the weight through entropy method, so as to calculate regional financial stability index. I build the VAR model with two variables——Scale of the shadow banking and regional financial stability index. Through a series of statistical analysis, finally it will reach a model equation and correlatively analysis. Eventually, I make suggestions on the basis of conclusions.