Research On The Effect Of Shadow Banking's Scale On The Stability Of Commercial Banks In China

With the ongoing reform of China's economy and the further opening of financial markets, the shadow banking system has had a profound impact on China's commercial bank system, even the whole financial system. On one hand, shadow banking has financed the small and medium enterprises and is a useful complement to the banking system. On the other hand, shadow banking also has a high risk and may cause serious consequences to the bank system due to its high leverage, low level of transparency and lack of supervision. Thus, what effects will shadow banking have on the stability of China's commercial banks and how deep are the effects? These questions have become the research focus of this paper.In order to solve above questions, this paper has chosen the scale of shadow banking to study and made research on its impact on the stability of commercial banks from the aspect of theoretical and empirical analyzes. Firstly, this paper has described the definition, manifestations and the cause of emerging of shadow banking and the stability of commercial banks in detail by summarizing relevant literature. And it has researched the specific impact shadow banking will have on the stability of commercial banks from channels and mechanisms. Then, this paper has described the current development of China's shadow banking and made a detail comparison to the US from the aspect of scale of shadow banking, the stability of commercial banks and the status of regulation. And it has analyzed the differences between the two countries. Besides, this paper has established the calculation base of the scale of shadow banking and the stability of banks according to the previous index system of scholars by reading lots of documents. Based on that, it has collected the data from 1992 to 2013 and estimated the scale of shadow banking and the stability index of commercial banks. On the basis of estimate, this paper has constructed a VEC model and investigated the dynamic impact of the scale of China's shadow banking on the stability of commercial banks using empirical method.The empirical results show:The scale of China's shadow banking is an important factor to the stability of commercial banks. Since the small scale of shadow banking and its positive effect currently, it will be good to the stability of China's commercial banks in a short or long term. However, shadow banking also has a high risk because of its own characteristics. And it may become a hidden danger for the banking system if not reasonably constricted. Thus, this paper has proposed some relevant suggestions based on the above conclusion and the supervision of shadow banking in US. Firstly, it should be clear that the supervision and the development of shadow banking are not contradictory. Besides, we need take appropriate measures to stimulate the development scale of shadow banking. Lastly, we should strengthen the supervision of China's shadow banking by clear its subject and improve the information disclosure system.