Research On The Innovation Of China’s Banking Supervision System In The Light Of Public Governance

Each and every social crisis will bring about profound changes in public management. The global subprime mortgage crisis that broke out in Western developed countries has indicated that the traditional banking supervision mode has failed in coping with challenges from financial development, that a reform in the traditional financial supervision mode is inevitable and that such reform might suggest significant lessons for effective banking supervision of China. This paper, with China’s banking supervision system reform as its research objective after the subprime mortgage crisis, and based on the public governance theory, makes an anatomic analysis of the profound changes that the subprime mortgage crisis has brought to domestic and international banking supervision. This paper warns us against the noteworthy challenges China’s banking supervision is facing. This paper, in the light of the public governance theory, attempts to integrate different approaches to banking supervision reform and systematically expounds the orientation and the major modes of reform in China’s banking supervision system. This paper proposes realization of China’s banking supervision system reform against a market-economy setting in a "three-in-one" mode, an integration of the governmental supervision system, the market supervision system and the self-discipline system of the banking sector.This paper, through comparative studies, empirical studies and case studies, analyses the major problems and risks that exist in the development of China’s banking industry and attempts to find out an approach to China’s banking supervision system reform in the new historical setting. This paper, deeming that the supervision system reform should not be directed towards a "more strict" supervision but should be directed towards a "better" supervision, proposes, in the light of the public governance theory, a supervision network that ensures mutual cooperation, support and supervision between government, market and the banking sector. This paper, after analyzing the respective limitations of government control and market discipline, which emerged in the subprime mortgage crisis, deems that government supervision is effective and helpful in remedying such limitations only if it is supported and cooperated by market discipline and banking discipline, with a "meta governance" function performed in banking supervision by the government that is directed by the public governance theory. Directed by this research, this paper puts forward some specific ideas for system innovation in banking supervision.The sketchy structure of this paper is as follows: This paper comprises seven sections that highlight the system innovation of China’s banking supervision in the light of the public governance theory, including comments on traditional banking supervision, the essence of the public governance theory, the features of banking supervision in the light of the public governance theory and other aspects of innovation in the Chinese banking supervision system.The introductory part is a summary of the selected topic, the research objective and the method used.Chapter1is an interpretation of banking supervision. It analyzes the nature of bank and the justification of banking supervision, studies and assesses the current researches in banking supervision and puts forward a new concept of banking supervision, i.e. the supervision and restriction of the banking system by the government and by stakeholders. Banking supervision includes both supervision and restriction.Chapter2depicts the current development of banking supervision system at home and abroad. It introduces the development of traditional banking supervision system of USA as a typical case and analyzes the features and drawbacks of traditional supervision mode. It also analyzes the development of the Chinese banking supervision system and the challenges the system is facing in an international setting.Chapter3introduces the content of banking supervision in the light of the public governance theory. It summarizes the public governance theory, the theoretical basis of this paper, analyzes the applicability of the public governance theory to the reform in the Chinese banking supervision system and presents analytical interpretations to some questions which are fundamental to the reform, such as value orientation and innovation modes.Chapter4lists the major tasks of government in banking supervision. This chapter, based on the previous chapter, specifies the three major tasks of government that is guided by the public governance theory in the banking supervision system, i.e. constructing an infrastructure for the banking market; constructing a macro-prudential banking supervision system and constructing a mechanism for coordinated and cooperative supervision.Chapter5expounds self-supervision of bank. This paper deems that self-conscious supervision is the supervision mode with the least social cost and should be an integral part of banking supervision framework as it helps avoid confrontation between the supervisor and the supervised. Self-supervision of bank includes governance of commercial bank corporate and undertaking of social responsibility. This paper, in terms of corporate governance, proposes establishment of a governance structure with "board of directors" as the center and also proposes other governance methods. In terms of social responsibility undertaking, this paper analyzes the current situation of social responsibility undertaking on the part of Chinese commercial banks and recommends some improvement measures.Chapter6anatomizes market supervision mechanism. This chapter deems that stakeholders are the best internal impetus in banking supervision and that the government can realize seamless supervision only if government function and market supervision forces are combined. This chapter consists of five parts which cover market supervision infrastructure construction and stakeholder behavior. The five parts are as follows: establishment of information disclosure system, public education in finance, financial consumer rights-interests protection, improvement in self-discipline function of respective industries and other market supervision forces.