Risks And Approach:Research On The Supervision Of China's Shadow Banking System

The 2008 global financial crisis exerted a profound impact on the world's financial system and the real economy in a majority of countries. The word "Shadow Banking" and its conception begun to enter the vision of financial regulation, raising concerns from major economies in the world and multinational financial organizations. Supervisory authorities such as the United States, Britain argued that the excessive expansion of shadow banking played an important role in 2008 global financial crisis, and have taken some financial legal reform measures to strengthen the supervision on shadow banking system.Compared to other major economies in the world, China has its own features in financial system structure, mode of financial supervision and degree of financial market development. Foreign shadow banking systems have some typical business models, such as wholesale funding and asset-backed securities. Chinese shadow banking system, however, operates some businesses similar to attracting deposits from and offering loans to the public, which has biggish differences with foreign shadow banking systems. However, with rapid development of financial market in China, the financial structure has become more complicated, and the trend of financial mixed operation is increasingly apparent. The cross-industry and trans-market business activities in shadow banking system are more frequent, while the traditional supervision mechanism faces difficulty to implement comprehensive and effective regulatory measures on shadow banking system. Moreover, phenomena such as supervision vacancy and supervision arbitrage are prominently serious, bringing huge challenges to our existing financial divisional supervision mechanism.Based on these, this article intends to conduct an all-round analysis on shadow banking system in China in the aspects of definition, typical representative forms and risks, current regulatory status, and existing problems. Combined with extraterritorial financial regulatory reforms and practices, this article will also put forward certain suggestions on consummating current shadow banking regulation system. Firstly, the article introduces diverse concept definitions from overseas institutions and organizations and notably divergent understandings in our country, and suggests that the definition of shadow banking system in China could draw on FSB's definition, defining shadow banking system as the credit intermediation involving entities, activities and products outside the regular banking system, and the traditional banking institutions which operate shadow banking-related activities. Then, based on the introduction of typical representative forms of Chinese shadow banking system such as commercial banks'financial products, trust products, entrusted loans and civil financing, the article makes some analyses on related problems in shadow banking system, such as inducing liquidity risk, reducing monetary policy efficacy, easily causing systematic financial risk, weakening financial efficiency and increasing regulatory arbitrage, and summarizes current status of China's shadow banking supervision and its defects, pointing out that with the increasingly apparent trend of financially mixed operation, the traditional "one central bank and three commissions" financial regulation mode faces many severe challenges such as overlap regulatory and regulatory gaps that need to be reformed. With regard to various financial regulatory reform measures conducted in the United States, Britain and FSB in the post-financial crisis era, these listed economies and organization updated shadow banking-related supervision ideas and measures, and have some common ground such as expanding the scope of regulation, implementing more vigorous regulatory standards, strengthening supervision coordination and emphasizing guard against systemic risks. These are something worth studying and we can draw lessons from them. Combined with overseas financial supervision experience and our own practice, the article tries to put up with some reasonable suggestions on improving efficiency, effectiveness and steadiness of China's financial system and preventing its risks. Suggestions include constructing macro-prudential regulation framework on the basis of deepening micro-prudential regulation measures, paying equal attention to macro-prudential and micro-prudential regulation, clarifying regulators and jurisdictions and promoting supervision coordination, building supervision mechanisms such as the system of early warning of dynamic risks, information disclosure and risk isolation, perfecting internal control and self-regulatory mechanism.