Banking Supervision Researches Under Financial Innovation Circumstances

With constant development of economic globalization and financial liberalization since 1980s, financial development became more global, financial rivals not only came from domestic, but also came from worldwide, this made the financial competitions more and more intensively, forcing countries to respond to changes in international financial markets, enhancing their international competitiveness of financial industries, pushing financial deregulation and creating relaxed circumstances for financial innovations in terms of policies and laws, the role of financial innovation thus became more and more prominent. On the one hand, as the efficient instrument of financial competition and the main driving force of financial development, financial innovation continued to expand the space of financial development and to strengthen impetus to the economy growing. On the other hand, financial innovation continued to make the accumulation of financial risks, the volatility of financial operations continued to increase, the vulnerability of the financial system continued to increase. In the absence of financial supervision, the global financial crises finally broke out, severely limited financial development, banking systems inflicted heavy losses, the sound operation of the banking system was seriously affected.With the development of financial globalization, financial integration and financial innovation, financial innovative products continued to adopt, new financial organizations continued to generate, traditional boundaries between financial institutions increasingly blurred, corresponding new financial system continued to introduce, banks increased complex and diverse businesses, competitions among banking institutions and non-banking institutions became more intensively. The banking supervision circumstances present the characteristics of dynamic changes, in order to continue to maintain the effectiveness of banking supervision, new trends and developments need to adapt, financial innovation characteristics need to grasp, comprehensive measures of financial innovation on banking supervision need to adopt.Under the circumstances of financial innovation, in order to maintain the banking sector competitiveness, to guard against and to defuse financial risks of innovation, to encourage financial innovation operating on sound basis,maximizing benefits and minimizing risks from innovations. Therefore, promoting rapid and healthy development of banking industry is of great significance not only on realistic aspects but also on theoretical aspects in the 21st century.The meaning of financial innovation circumstances in this article refers to the various objective conditions and factors with direct or indirect impact including: international,national and regional economic and financial situation, macroeconomic policy, legal environment, banking development trend and scientific technological progress. Specific financial innovation circumstances, including the economic environment, financial environment and social environment. Specifically, the economic environment, including macro-economy operations, financial institutions and economic globalization, financial environment, including financial markets, financial instruments, monetary policy, social environment, including political systems, laws and regulations, technological and cultural and social norms and others aspects.Nowadays, financial innovation circumstances is manifesting with complex and volatile features Demonstrating as follows:links between banks, insurance companies, security companies and trust companies are strengthening, financial businesses intermingling and infiltrating with each other, funds relations and business cooperations increasing steadily, financial innovation turns to comprehensive and mingling directions. Opposition and uniform contradictions between financial innovation and banking supervision are developing deeply. The demand for banking development pushes financial innovation in order to pursue profits and to avoid risks, keeping banking systems'stability needs banking supervisions. In order to maximize profits, banks launch financial innovations to avoid banking supervisions, but when financial innovation endangers the banking stability, banking supervision will be reinforced, another new round financial innovation occures.Based on the property theory of financial innovation circumstances, the studies on the model of banking supervision shows three-dimensional factors:financial innovation, banking supervision and finance development are influencing with each other, proper balance between these three factors will benefit the harmony of financial innovation and banking supervision.Through in-depth studies, this article puts forward some innovations on research method and contents:Firstly, the goal-oriented novel hits the mark. In this article, the banking supervision of exposure to financial innovation circumstances combined the international financial crises from financial innovation and banking supervision in-depth analysis, the banking supervision under financial innovation circumstances putting forward counter-measures for financial innovation and banking supervision coordination in hand and symbiotic development.Secondly, Through deep-going studies, from the view of banking supervision under fmancial innovation circumstances, bringing forward the concept of financial innovation circumstances scientifically. The concept of financial innovation circumstances are conducive to set borders for the factors affecting the financial innovation, doing analysis and studying dialectically. It is of more practical significance to banking supervision practices and theoretical studies.Thirdly, studies on the game relations between financial innovation and banking supervision, by establishing dynamic game figures, introducing banking supervision coverage index to analyse the banking supervision development, overall and deeply analysis the relations between banking supervision and financial innovation with progressive interactions and the evolutions from lower level to higher level. This approach even the traditional "struggle" and "complementary" to enrich and to expand analytical framework, also make the analysis of the game relationship more systematic and comprehensive in conducting research to make up for the previous defect of rigoros analytical framework.Fourthly, developing the Romer Model for New Economy Growth, based on the property theory of financial innovation,building banking supervision model to analyze the property based on financial innovation circumstances, banking supervision, financial development, reciprocal causation between the three variables, the interaction mechanism of mutual influence. Learning from the financial crises exposed from financial innovation and the lessons of banking supervision, analysizing of trends among the attempt to control the leading innovation, and innovation to lead the development and innovation to promote regulatory innovation, and regulatory innovation to adapt to financial innovation need to promote economic development perspective to address the financial innovation game with difficult issues of banking supervision. Meanwhile, Peltzman Model for supervision of financial innovation circumstances combined with characteristics of banking supervision, applying balanced analysis of banking supervision, indicating the existence of financial market development and financial innovation to meet the corresponding equilibrium state of banking supervison.Fifthly, this article proposes measures in line with Chinese banking supervision under financial innovation circumstances, namely:to establish firewalls and safety nets between international and national markets, strengthening the counter-cyclical supervision. In the process of promoting and encouraging financial innovation, learning from international financial crises due to lack of financial supervision and undue financial innovation. For the dynamic development of financial innovation, banking supervision need to be dynamic or continuous innovation in response to promote financial innovation.