Banking Structure And Financial Stability

Impact of banking structure and its influence on bank behavior on the banking and financial industry has been a long-term concern of the public and gained much attention from the scholars and researchers as well because any form of market failure or anti-competitive behavior on economic growth, efficiency and welfare has far-reaching influence.From the80th of last century, research on the relationship between banking structure and financial stability began growing. This is not only due to the trend of economic globalization and financial liberalization leading to more financial fragility problems of financial institutions and destructive interference from financial crisis, but also reflects every modern government’s consideration of making financial supervision more flexible and rethought from the financial industry.For those transition countries which were in or have just finished the process from planned economy to market economy, research on this has more realistic and far-reaching significance:through policy guidance and institution construction, helping domestic banking industry grow and relying on helping of foreign banks and domestic capital assistance of more capital, experience, technology and confidence, improving business performance, securing financial stability and making economic growth and welfare improving come true.At the same time, during the period of social transformation, every field and every industry has been experiencing upheaval, including the banking industry. On the basis of institutional change, will the relationship between banking structure and financial stability show any differences? Does it show any difference when comparing with those developed and developing countries? Will different institution performance in different countries show different results? Based on the analysis of institutional change theory, it may offer us some totally different answers. Meanwhile, these answers will be undoubtedly of great theoretical value and practical significance for guiding transition economies and other emerging market countries’reform.Based on the above considerations, relationship between banking structure and financial stability-based on the CEE and the CIS countries’institutional change is chosen to be the title of this thesis. It intends to make systematic research on dynamic relationship between banking structure and financial stability on the background of institutional change. The analysis may give some theoretic reference and policy suggestion to those transition countries and other emerging market economies. It is worth mentioning that, the subtitle of the thesis reveals the object of the research is the CEE and the CIS countries. The reason we make this arrangement is mainly based on three reasons:one reason is that these countries belong to the group of traditional transition countries although the academic circles think that the formers have been successful and the latter are still in transition process.In view of the contents of the research, these countries have all experienced or are experiencing the transition process from a planned economy to a market economy and they all take enumerous reforms in the process of financial reform. This enables these countries to become excellent sample of the research. The second reason is the different effect of their financial reform can give us a chance of comparison. Therefore, research on the the CEE and the CIS countries’bank industry reform and the relationship between financial stability and the influence mechanism analysis allow us to from a comparative perspective for better understanding the banking market structure and financial stability. The third reason is that China is also in the process of economic transition and financial reform. Although there are different banking development and system background between them, experience and lessons from the CEE and the CIS countries’banking reform paths, institutional innovation way, financial liberalization order and selection of mode can become important reference for our economic system reform and financial stability in practice. This is the final purpose of the research.The specific content of the research are as follows:First part is the full text of the introduction. This chapter mainly introduces research background, significance and generalize the research purpose, text structure distribution and main research methods, pointing out that there may be major innovations and defects, and indicating the directions for future research and possible problems.Next, we come to the body part. The first chapter is literature review. This chapter is mainly about several core concepts including banking structure, financial stability and institutional change. Then from the theoretical point of view, gives a brief introduction about the theory of industrial organization with SCP analysis framework, financial deepening, financial control and financial structure, institutions and the theory of financial vulnerability and financial stability et. This is to provide the necessary theoretical background knowledge and research framework. Finally, in the domestic and foreign literature reviews, summary and evaluation of previous research will be given.The second chapter is the theoretical research on banking structure and the financial stability. This chapter mainly uses theoretical analysis. First of all, from the evolution of banking structure in two-dimensional space, it will discuss the banking market structure and property rights structure evolution of dynamic equilibrium. Secondly, from the market structure, competition and financial relationship stability analysis, grasping the effect of market structure of banking industry on financial stability:the pattern of division of labor, relations between banks and enterprises, price linkage and economic structure. In some parts of the analysis, mathematical method will be used.The third chapter is the theoretical research of banking market structure and financial stability study. This chapter mainly discusses the banking history of the CEE and the CIS countries. First, it will analyze of the economic transition under the background of the reform of the banking industry and its current situation, focusing on the comparative analysis and summarization of characteristics. Secondly, using structured and unstructured method, the banking structure of the CEE and the CIS countries is measured, and different measures on the property right structure is used too. Finally, the CEE and the CIS countries’financial stability status were measured and compared. Therefore, this chapter is actually the second chapter to the fact based on role.The fourth chapter is about the institutional changes on the relationship of banking structure and financial stability. This chapter is mainly on the theoretical analysis. Under the background of banking market structure and financial stability relationship, research on institutional change will make it easier to grasp the relationship. Lastly, a possible theoretical innovation to provide the best possible theoretical analysis framework and a relatively rigorous theoretical process will be made.The fifth chapter is about institutional change in transition and its performance and achievement. This chapter will talk about practices in the CEE and the CIS countries as the representative of the banking reform and institutional change analysis. The purpose for doing this is to generally understand its institutional changes and its major achievements or lessons. Finally, some simple logic judgment and explanation will be given.The sixth chapter is the model analysis of institutional change, banking structure and financial stability. Based on former theory discussion and actual situation introduction, this chapter will construct empirical model and make empirical analysis. The main content will focus on two parts:one is considering the relationship between banking market structure and financial stability without the effect from institutional change, which is to compare traditional conclusion. The two is to consider the impact of institutional change on the banking market structure and financial stability, which is also the main purpose of this thesis. Moreover, in the institutional analysis part, it has three parts:the basic economic institutions, the financial institutions and the banking institutions. Though the data source is limited, the research will try to grasp the relationship between institutions, banking structure and financial stability as well.Finally, the seventh chapter is the conclusion and the enlightenment to China. As the end, this chapter mainly plays a role of summarizing: on one hand, it will conduct a comprehensive review and summary, point out the significance and value of the thesis; on the other hand, it will provide the corresponding enlightenment and proposal to our country’s banking reform. As the CEE and the CIS countries are both in the process of transition, their experience or lesson are both meaningful to our economic system transition and financial reform. This is precisely one of the reasons why we choose the CEE and the CIS countries to be the object of this research.