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【Lijianjun】The formation, influence and solution of Chinese shadow banking systematic risks

作者:     日期:2015-04-08    来源:

Jianjun Li, Ying Xue
<Quantitative Economic Technology Research> 8th, 2014
 
Professor Jianjun Li of our department, with his academic postgraduate Ying Xue, published their research essay “The formation, influence and solution of Chinese shadow banking systematic risks” in the 8th <Quantitative Economic Technology Research>, 2014.

The field of Global Academy commonly defines shadow banking from the following definitions: Firstly, supervision standards, which means financial institutions and credit intermediary affairs deviating from the supervision system (Geithner, 2008); Secondly, institution standards, referring to the non-banking financial institutions holding complicated financial derivatives (Gordon and Metrick, 2010); thirdly, function standards, such as credit intermediaries with the functions of credit conversion, duration conversion and mobility conversion (FSB, 2011). Comparatively, the function perspective is more comprehensive. This essay inherits the definition by FSB, 2011, as the entities and activities as credit intermediaries offering the function of mobility conversion, duration conversion and credit conversion with the attribute of high leverage without strict and prudent supervision. The financial business off the balance sheet, the corporation affairs between trust companies and banks and securities companies, investment with insurance of insurance companies and the re-purchase of bonds, monetary funds and security capitalism of dealer markets can all be included in the research field of shadow banking.

The research process in the field of shadow banking systematic risks is so limited that no effective supervision model has been built up. Moreover, the existing systematic risk testing model applied in the traditional financial system is hard to be used in shadow banking system for the main reason that the index for systematic risk in the traditional model doesn’t match the shadow banking system of China. In order to measure the formation of Chinese shadow banking systematic risks, we should be based on the national conditions of finance in China to clarify the formation and infection of risks and to adopt proper measures to explore and test them. For the time being, domestic scholars all use the foreign model in the field of the positive analysis of systematic risks of Chinese financial institutions, such as SES model used by Xiaoyun Fan, matrix based on by Guohua Gao and Yingli Pan, etc. The methodology innovation in systematic risks is too insufficient to push forward the research of Chinese shadow banking.

Theoretically, the paper firstly researches the formation and infection channels of shadow banking system as well as the formation mechanism of systematic risks based on the present systematic risk measure theories. Accounting account mechanism, market psychological panic, choosing behavior magnifying mechanism and monetary and credit conduction mechanism are all among shadow banking risk infection mechanisms. Under the hypothesis of basing systematic risks on the accounting account conduction mechanism, the author testifies that risk transmission among Chinese shadow banking system sections is a Markov process. Under this precondition, the relationship between direct and indirect coefficients of input and output model has been included in the analysis of direct effect and total effect of risk transfer for the calculation of different risks from section to section in Chinese shadow banking system and the expressions of systematic risks, the systematic risk influence index and systematic risk reaction index.

Positively, this paper aims its target at main participants in Chinese bond re-purchase market such as commercial banks, trust companies, securities companies, funding companies and insurance companies. The sample time window chosen for the positive analysis is from 2007 to 2012, calculating the systematic risks of the five types of institutions above. Influence coefficient manifests the apparent differences among Chinese shadow banking systematic risks. Trust companies were the main source of systematic risks between 2007 and 2012 and no big difference was found in insurance companies, securities companies and banks. Reaction coefficient reflects the distribution of the asset breach risk externality, and banks take the most responsibilities of systematic risks. Other sections often leave their partial risks to commercial banks. From the longitudinal angle, the shadow banking systematic risks showed an upward trend in the observation period, which was most obvious in the year 2008 and 2012. In order to prevent and control systematic risks, measures should be taken in the building of risk isolation mechanism, capital and leverage supervision, information transparency, macro-prudent frames and risk reaction mechanism, etc.