Analysis Of The Influence Of Shadow Bank On The Stability Of Commercial Banks In China

Shadow Bank originated in the United States.It has created a vast system of credit creation according to the core of the assets securitization.Due to its high leverage and lacking of effective supervision,the development of the shadow bank system has become an important reason for the US subprime crisis.In China,Banks are still in the core position in China's financial system.Because shadow bank has an important influence on the stability of the financial system,it's necessary to research it's influence on banks' stability.This paper adopts the method of combining theoretical analysis and empirical demonstration.It defined the definition of shadow bank,analysis the operation mechanism of shadow Bank,combined with the Bank stability indexes.The qualitative analysis of China's shadow bank goes through the internal channels,combined channels and external channels that affectcommercial bank capital adequacy,asset quality,liquidity,and transmission mechanism of the external financial market risk in commercial bank,so as to demonstrate the mechanism of shadow Bank affecting commercial Banks' stability in China.This paper constructed two variables,the commercial stability index and shadow bank scales,using error correction model and granger causality test to test the relationship between the two variables.The result shows that the scope of shadow bank has two side influences on BSI,both the positive and negative effects.The development of shadow bank is different from it in the US.Despite its risk,Shadow bank in China may be a chance for financial creation.Shadow bank under proper supervision will slightly promote the stability of commercial banks.First,the shadow bank should increase the transparency of their own to reduce the overall risks.Second,the legislature should improve and expand the shadow bank laws to expand shadow bank's living space.Third,the bank system should be established firewall in order to cut off the shadow bank risk transfer and financial regulators should strengthen coordination and cooperation with the various regulatory agencies to achieve the overall supervision of the shadow bank.Finally,our policy-making authorities should promote gradual interest rate market-oriented reforms and the strengthening of international cooperation in financial regulation.