Study The Regulation Of State-owned Banks

The topic of the dissertation is chosen in view of the following backgrounds. On the one hand, China's four state-owned commercial banks (the big four) are currently undergoing reform. According to the scheme of the State Council, the big four's reform consists of four stages, namely, financial reorganization, stock restructuring, introducing strategic investors and getting listed in the stock exchange. The core of the reform is to establish sound corporate governance structures within the big four. The reform of the big four is expected to be accomplished in the coming several years. However, the question remains that after the reform whether the big four can become real modern commercial banks, which can be compared to the commercial banks under private ownership. If not, what are the differences between the stated-owned banks and the ordinary commercial banks? And how will the differences affect the behavior of the state-owned banks and their stake-holders? On the other hand, in recent years, in line with the trend of international banking regulation and supervision development, China's banking supervisory authority has been promoting the construction of the formalized, professional and internationally accepted banking regulation and supervision, ranging from supervisory objectives and philosophy to supervisory techniques and approaches. This move can be evidenced in the banking laws the authority contributed to develop and the regulations and policies the authority issued. All those rules and regulation governing banking supervision are based on the related standards and principles developed by Basel Committee on Banking Supervision (Basel Committee), drawing on the practices of the developed countries or districts. Again the question remains that whether all the prudential regulatory principles and practices assuming private ownership of banks are applicable to China's banking industry in which state-owned banks play a predominant role. The combination of the above mentioned two questions points to the question this dissertation seeks to answer. Basel Committee believes the principles and practices it advocates are applicable to the state-owned banks as well. Accordingly, China's banking supervisory authority is making efforts to unify the regulatory standards governing all types of commercial banks in China step by step. However, are the banking regulatory principles and practices as represented by the Basel principles fully applicable to China's state-owned banks under reform or after reform?The significance of the chosen topic can be explained as follows: with a view to the primary status of the state-owned economy in China, which needs the support of financial system, and the security of national financial system, it is unlikely that Chinese government gives up the control of the big four, so the government ownership of the big four can not be fundamentally changed. Therefore, the capital base and the corporate governance of the big four would still be greatly different from those of the ordinary commercial banks. Besides the big four, most of the joint-stock commercial banks and the urban commercial banks of China are practically under the control of governments, which makes them essentially state-owned banks. Thus, the regulation and supervision of China's banking industry are primarily the regulation and supervision of state-owned banks or banks under the control of governments. So the research of the regulation and supervision of state-owned banks has a realistic significance. From a global perspective, although state-owned banks as a type of state-owned firms are generally linked with low efficiency, relevant researches show that state-owned banks exist in many countries, no matter developed countries or developing countries, socialist countries or non-socialist countries. The existence of state-owned banks despite their low efficiency is worth probing. Meanwhile, since state-owned banks have wide existence, the research on the regulation and supervision of state-owned banks must be meaningful. However, the theoretical literature on this topic can rarely be found.The state-owned banks in this dissertation refer to the banks under the control of governments, including exclusively state-owned commercial banks and state holding banks, as well as the banks practically controlled by governments though the state-owned shares have not amounted to a state holding proportion. In other words, so long as a bank is practically controlled by the government and whose decision-making process is directly or indirectly controlled or significantly influenced by the government, the bank is considered a state-owned bank in this dissertation. Complementarily, the "ordinary commercial banks" defined in this dissertation refer to the commercial banks not controlled by governments, typically those privately owned banks whose ownership is separated from the management.The regulation and supervision defined in this dissertation refer to the regulation and supervision of banks, their business activities and other banking transaction participants' behavior. When the contents, measures and approaches of the banking regulation and supervision are discussed in this dissertation, the Core Principles ofEffective Banking Supervision issued by Basel Committee is used as main reference.There are two assumptions in this dissertation. First, the dissertation assumes the existence of a public financial safety net, including the deposit insurance (implicit or explicit), the last lender and the relief of problem banks; Second, the dissertation assumes that the banking supervisory authority represents the interests of the public or the depositors, and the interests of the authority and its staff are not considered.With the above defined concepts and assumptions, this dissertation discusses the special features of the state-owned banks and the impact of these special features on the behavior of the state-owned banks. Furthermore, the dissertation argues that the regulation and supervision of state-owned banks should also have some special features in order to achieve the supervisory objectives.To begin with, the dissertation provides relevant evidence to prove the wide existence of state-owned banks in today's world including the evidence of state-owned banks' predominant role in China's banking industry. The dissertation also analyzes the reasons for the wide existence of state-owned banks, and in particular, the reasons why the state- owned banks in China will still play an important role for quite long period, which also justify the necessity of the research of the dissertation.Then the dissertation goes on to explore the special features of the state-owned banks from two aspects, i.e. capital base and corporate governance, further justifying the necessity of the research of the dissertation. By analyzing the capital base of the state-owned banks, the author concludes that the capital base of state-owned banks should include reputation capital, which makes state-owned banks different from the ordinary commercial banks and that the state-owned banks need little physical capital to run their business. The difference between state-owned banks and the ordinary commercial banks in terms of corporate governance is also analyzed and the special features of state-owned banks' corporate governance are pointed out.Given the special features of state-owned banks, their regulation and supervision should be different from those of the ordinary commercial banks. In other words, the regulation and supervision of state-owned banks should also have some special features. Three chapters of the dissertation discuss the special features of the regulation and supervision of state-owned banks. Although the dissertation doesn't provide a comprehensive analysis of all the supervisory issues of state-owned banks, it provides insights into the supervisory issues typical of the state-owned banks,...