Optimal Bank Regulation System

This dissertation presents an overview of a theoretic analysis of optimal banking regulation. It examines the origin of the banking regulation and the process of its evolution from the view of Economics of Regulation, and attempts to account for China's banking regulation during its economic transition.This paper is consists of two parts. In part I, at first we provide an introduction of the vast literature on the Economics of Regulation and banking regulation in terms of the basic argument for why does a bank need to be regulated. Second, we discuss the complete equilibrium and dynamic game of banking regulation, the origin and evolution of regulation, using classical economics and evolutionary game theory. We advance a theoretical analysis frame of the optimal banking regulation using contract theory and information economics, characterizing the optimal banking regulation by three factors, which are transparency, independency and flexibility. Then we argue regulations on the regulator from the point of government dilemma, stress the arrangement of regulation resources collocate under different information structure.Part II concerns about a theoretical use and an attempt explanation of Chinese banking regulation. We study the evolution process of Chinese bank institution, discuss the issues of banking regulation performance and banking system stability etc., emphasize the important of law enforcement simultaneously. We focus on the policy of optimization and improvement of Chinese banking regulation in the view of macroeconomics and microeconomics respectively. In the end, we hold that the banking regulation in China should target its aim for efficiency-based principle, construct its organization as multi-peaks structure on the basis of complete information, and need to establish an incentive compatibility mechanism in order to improve its performance in the future.