Shadow Bank Lending Is Approaching Half Of The Country: "Suppression" Or "Caress"?

Non bank

"Shadow banking" has become a target of public criticism.

A few days ago, the global financial stability Council (FSB) and the international monetary and Financial Committee (IMFC) made a statement: strengthening the "shadow banking".

At the beginning of May this year, Liu Mingkang, chairman of the China Banking Regulatory Commission, pointed out at the twenty-second meeting of the CBRC that the banking industry is facing three major risks, preventing platform lending risks and real estate.

This is the first time that the banking supervision department has raised the risk of "shadow banking" to such a high level, which means that the risk of "shadow banking" is imminent.

The biggest problem of "shadow banking" is "anti customer oriented". To a large extent, the "shadow bank" is out of government regulation. When the problem is exposed, the government has to rescue because of the serious consequences, thus making the "shadow bank" a high income and low risk industry.

Shen Liantao, chief consultant of China Banking Regulatory Commission, said to China Economic Weekly (micro-blog).

The Chinese version of "shadow banking": silver letter cooperation, underground banks

The concept of "shadow banking" was born 4 years ago at the annual meeting of the Federal Reserve. It is also known as the "shadow financial system" or "Shadow Banking system", which generally refers to those non banking financial institutions and financial institutions that have some banking functions but are not subject to regulation or under supervision.

From a worldwide perspective, the "shadow banking" system consists of four parts, namely, securitisation institutions, whose main function is securitisation of traditional financial products; and market-oriented financial companies, mainly including hedge funds, money market mutual funds, private equity investment funds, etc., are mainly engaged in financing between traditional financial institutions and customers; in addition, there are structured investment institutions and securities brokers.

"Most people in the industry believe that the existence of the" shadow banking system "is one of the culprits in the US financial crisis, because the real estate loan undertaken by the banking system has been separated from the regulation after securitisation.

Micro-blog, deputy director of the Financial Research Institute of the State Council Development Research Center and chief economist of the China Banking Association, told China Economic Weekly.

Although there are no acts of securitisation of real estate loans in China at present, "shadow banks" still exist under highly financial supervision, mainly in the form of financial cooperation such as "bank credit cooperation" and underground banks.

"Bank credit cooperation" means that banks provide loans to enterprises through the way of trust and financial products.

Specifically, through the cooperation between banks and banks, banks can not use deposits to issue loans, but raise funds through issuing trust and financial products and loans to enterprises.

Since trust and financial products belong to the off balance sheet assets of banks, they are less or even not subject to the supervision of the banking regulatory authorities.

A middle-level manager of a bank in Shanghai told China Economic Weekly: "President Liu Mingkang has repeatedly stressed the need to pay close attention to the issue of cooperation between banks and credit and to crack down on illegal financial activities. This shows that the problem is already serious."

Prior to the 2011 Annual Meeting of the Boao forum for Asia, Liu Mingkang has suggested that the CBRC will pay close attention to the "shadow banking" and the cooperation between banks and banks that will cause high leverage.

These institutions provide liquidity and provide credit, just like banks and insurance companies.

Their wages are higher than those of banks and insurance companies, but their risks and costs are not well measured.

Liu Yuhui, director of the China economic evaluation center of the Chinese Academy of Social Sciences and director of the financial key laboratory, told China Economic Weekly: "in fact, there are many" shadow banking "businesses in domestic banks, such as entrusted loans, bank credit cooperation, credit management products, and so on. Banks play an intermediary role and do not occupy the capital of banks." micro-blog "

If regulation requires that part of the business be pferred from the outside to the table, the management of the inclusion of the banking business is essentially the same as the normal credit, and will be included in the scale of the credit management of the bank so that the structure of the overall credit delivery of the bank must be adjusted to adapt to the new regulation.

Cooperation scale reached 1 trillion and 530 billion

The Federal Reserve has released a report that at the peak of 2007, the "shadow banking" assets of the United States amounted to $20 trillion, which was more than the traditional bank's $12 trillion.

In China, although the total scale of "underground banks" is hard to calculate, the scale of "bank credit cooperation" has been astonishing.

In spite of the precaution against risks, the CBRC last year stopped the company's cooperative financial products, and issued documents to strengthen supervision. However, a data released by the China Trust Industry Association showed that, as of March 31st this year, the scale of the cooperative financial products was still 1 trillion and 530 billion yuan.

A middle-level manager of a bank in Shanghai told reporters, "if the credit and financial products" lenders "can not be repaid or partially repaid, the people who buy these financial products will suffer heavy losses and then cause social problems.

In January this year, the CBRC issued the notice on further standardizing the business of banking and credit financing cooperation, requiring all commercial banks to pfer the off balance sheet assets of the bank's credit and financial cooperation business into the table by the end of 2011, and make specific plans for the pfer of the credit cooperative trust loans of the commercial banks in the form of not less than 25% per quarter.

Shen Liantao told reporters that China's Bank credit cooperative financing has met the characteristics of a certain "shadow bank": on the one hand, it is difficult to be regulated; on the other hand, after commercial banks have marketed to customers through large-scale credit asset securitization, their profits are locked, and the risk is completely pferred to the customers' hands, thus resulting in the asymmetry of risk and income. This is similar to the real estate credit securitization in the United States.

Fortunately, China's credit asset securitization has not yet entered the stage of leveraging, and it is relatively simple to handle.

However, there are also insiders who believe that although the CBRC regards the end of this year as the end point of the "sunshine" of cooperation between banks and letters, whether it can be done on time is a problem, and even if it does, it may lead to other financial security problems.

Some people worry that tightening the cooperation between banks and banks will further expand the size and geographical distribution of "underground banks".

"The more we fear, the more we fear".

"When money is tightened, the original bank borrower becomes more and more difficult to borrow. When the capital flow fails, who can I find without looking for the underground bank?"

A Zhejiang businessman who did not want to be named told China Economic Weekly. "Underground banking and private lending are financial behaviors outside financial institutions. Their existence is due to their market demand.

The reason why it can not be sunny is that financial regulation and entry threshold are very high, so it is very difficult to legalize itself.

There are two totally different views on the issue of "shadow banking" in the global financial community.

One view is that the existence of "shadow banking" is the main reason for the current financial crisis. It is imperative to incorporate "shadow banking" into regulation.

Another view is that, if too much supervision is strengthened, the existence of "shadow banking" may become more hidden and harder to regulate, and the situation of "more anti terrorist" appears. Even the strengthening of supervision has led to the emergence of more "shadow banks".

Gary Cohn, Goldman Sachs Group President and COO Gary, issued a warning at the winter Davos forum this year: "what I'm worried about is that we are pushing more and more regulated financial activities into less regulated and opaque areas."

In China, some scholars are tolerant of the view of "shadow banking", and regard some practices of "underground banks" as the practical exploration of China's financial reform.

Li Yang, vice president of the Chinese Academy of Social Sciences, said in an interview that during the "12th Five-Year" period, the supervision of the three frameworks of capital adequacy ratio, liquidity and statutory reserve ratio could not be relaxed. Therefore, for the financial sector, the focus of innovation is to develop a "shadow banking" system that is rich in color and meets all kinds of needs.

It is difficult for regulators to agree on this.

According to the data of the people's Bank of China, in 2010, new loans for RMB loans accounted for 6 trillion and 330 billion yuan, accounting for 44.4% of the total financing. This means that the loan regulation of the other non bank financial institutions such as bank credit cooperative financing, underground banks, small loan companies, pawn shops and other other non banking institutions has approached half of the total.

This objectively shook the people's Bank as a central bank to exercise interest rates, deposit reserve ratio and other conventional measures to curb inflation.