Modern Theory Of Banking Supervision And The Improvement Of The Regulatory System In The Bank Of China

Banking is one of the specific high-risk industries, and bank failure and financial crises influence world economy in cycle when banking came into being. From certain perspective, banking development is a kind of risk history. The last two decades of this century have witnessed the continual changes of economic integrity and financial globalization, which improve all-aspect transitions of banking industry, from operation idea, management measure to risk control. Rather, according to the last count, 130 of the 180 IMF members had suffered from varying degree of bank distress of fragility in the last 15 years (1980-96). Financial globalization prompts competition, improves the running efficiency, however, which also intensifies the relationship and direct interconnections/linkages among financial institutions, tools and markets. This phenomenon rapidly increases the international risk of a chain reaction of financial crisis, and the growth of approach, opportunity and velocity of financial risk exposures always make a country's bank crises spread to a larger district, even all over the world.Due to the increasing instability of world economy and finance, strengthening financial regulation and supervision, maintaining safety and stabilization of all financial system has become the common conviction in governments and financial management authorities. Undoubtedly, banking regulation and supervision are one of the most importance aspects. On one hand, economists explore the theoretic foundation and effectiveness of banking supervision and supervision, for example, Diamond and Dybvig's banking run model, Kaufman's systemic risk theory, Stiglitz's financial restrain theory, et cetera. On the other hand, practice departments continually enact different laws, rules and regulation in order to revise and remedy the faultiness in banking regulation and supervision, try to promote the technical measures and management level and to perfect institutions.In recent years, under the endeavor of financial regulation and supervision authorities in countries around world and international organizations, the idea and system have arises a lot of changes. The characteristics can be concluded as folio wings:firstly, banking regulation and supervision has transferred from institutional-oriented regulation to combination of institutional-oriented regulation and prudential risk-based supervision and market discipline. The framework stresses the importance of bank management developing an internal capital assessment process and setting targets for capital mat are commensurate with the bank's particular risk profile and control environment. Supervisors would be responsible for evaluating how well banks are assessing their capital adequacy needs relative to their risks. Secondly, implement effect and all-orientation ongoing supervision. It comprises onsite examination and offsite supervision, regulation and risk-based supervision, manager monitor and running monitor for the whole institutions. Thirdly, co-operation among the banking regulation authorities is being strengthened. In recent years, the Basel Committee has constituted and framed a lot of rules and advises for regulatory standard and principle for further unify criterion and strengthen co-operations. Fourthly, technology innovation has been experienced and adapted. Computers and Internet technology have widely applied and spread. The latest development helps regulatory authorities easily collect and calculate data, deal with information, assess financial operation, enhance analysis reliability and improve information disclosure.Moreover, as we proceed, we need to recognize the new realities of our country's financial landscape. The Asia Finance Crisis had caused us to rethink our views on the appropriate policymaking that totally deregulation and financial liberalization is not panacea. At the same time, we do not want to return to the highly regulated and segmented financial systems like the past. The highly regulated would severely restrict on innovation and compet...