Cross-border Bank Systemic Risk Regulatory Study

Mainly from the angle of host country, this dissertation discusses issues related to the supervision of multinational banks. Inspired with the supervision notion of the Basle Committee and for highlighting the purpose of supervision, the author uses "systematic risks" as the "starting point of theory and logic" of supervision of multinational banks. The emergence of systematic risks originates from two factors: macro-economy and banking industry itself. Focusing on the controllable factor of supervision ?banking industry itself, the author has explored the sources of systematic risks, i.e. the banks' asymmetric information and negative externality, the interaction of which causes the rapid extension of banking risks and the loss or even collapse of market confidence, thus providing a theoretical foundation for solving the conspicuous problem of multinational banks' asymmetric information and negative externality."How to supervise" is generally elaborated by many studies in a sequence of three interrelated links ?market access, market operation and market withdrawal. But the author thinks that this research should be made in a negative sequence: put market withdrawal( i.e. financial safety net) in the first place of supervision process The first reason is that financial safety net can stabilize market confidence and is an irreplaceable link in coping with systematic financial risks. Secondly, financial safety net may bring about moral risks which can quite easily transform into "systematic financial risks" . Therefore, the prevention of moral risks induced by financial safety net affords theoretical basis for supervision of market operation and access. Thirdly, supervision of market withdrawal is a part without international agreement and which has been least studied so far. The author gives first priority to supervision of market withdrawal helps to arouse researchers' attention and interest.the author follows such a way of thinking ?financial safety net is mainly on guard against systematic risks generated by negative externality and asymmetric information, supervision of market operation against moral risks intrigued by asymmetric information and financial safety net and supervision of market access against adverse selection caused by asymmetric information. Financial safety net has the security of the whole financial system in mind while supervision of marketoperation and access is aimed to eliminate systematic risks in the bud.the author has from a historical way, conducted an overall observation of home and international supervision of multinational banks, and then stressed the observation on current conditions of supervision of foreign banks in some typical countries and areas such as the United States of America, Japan and European Union.Whatever is discussed ?supervision theories or practice both at home and abroad, historical observation or analysis of current conditions, it is for the purpose of finding out and solving the problems in supervision of foreign banks in China. Systematic risks in China stem from two sources. One originates with foreign banks' internal risk management, which is the same case as in developed countries. The other results from foreign banks' extrusion of survival space from vulnerable Chinese banks , leading to possible bankruptcy. The above two systematic risks determine the notion and methodology of the supervision of foreign banks in China. As far as the overall supervision situation is concerned, supervision aim should change from prevention of bankruptcy of individual banks to prevention of systematic risks. Supervision goal should change from an undue emphasis on financial stability into financial efficiency as well as stability. Supervision direction should change from replacement and elimination of market to its perfection and supplement. Supervision responsibility should be distributed from sole central government to individual economic bodies such as banks, depositors, creditors and trade organizations. Supervision means should change from simplificat...