Studies On Market Structure, Ownership Structure Of Banking Industry And Financial Stability

Financial stability lies in the stability of the banking industry, which is a fundamental conclusion drawn from the research of finance in the 20th century. Inspection of finance history reveals that although the banking industry is not the break-out of financial crises but the monetary market, the foreign exchange market, or the stock market, the damage by the banking crisis is the most severe. China's financial system is typical of bank-based, so the stability of the banking industry is more important to sustain financial stability in China. Since China became a member of WTO in December 2001, the banking industry has made substantive progress. Profitability of various banks has been increasing; financial innovations have been developing; e-finance has been widely spread; cooperation competition and mixed-operation have been trends in China. And a growing concern has been focused on the security of the banking system accordingly. People have started to attach more importance to the impact of the market structure and ownership structure of the banking industry on the financial stability.Based upon some application of theories of industrial organization and new institutional economics on the study of banking industry structure, there is still open to debate whether the industry structure to be concentrated or competitive, and whether banks should be privately run or publicly owned. Given the unique nature of this industry and Chinese institutional characteristics, I attempt to focus on the market structure and the ownership structure and explore ways to maintain the financial stability in China. The aim of this thesis is to find a suitable optimized path of banking industry structure under the requirement of financial stability.The dissertation is organized into 5 chapters. Chapter one presents relative theories employed in the study. Chapter two compares different countries with regard to their banking structure and their situation of financial stability, from which there is some inspiration for China. Chapter three to chapter five is the main. Firstly the change of China's banking structure is expounded and some relative disputed topics are showed and debated. Secondly, employing state utility model there is deep analysis of the path of China's banking structure in order to seek an optimized path in the future. Finally, there comes to some conclusions and some policy proposals of optimizing banking structure under the requirement of financial stability.The dissertation reaches the following conclusions: first, as a special section, the banking industry should be concentrated to some extent. It is not to damage market competition but to avoid the risks accumulated by excessive competition. The market concentration variable is not the only measure for efficient competition among the industry. There is no contradiction between them. Second, for a developing country or a country in an economic transition period such as china in which state shares are still dominant in ownership structure, privatization of the banking industry is imperative under the situation. But it is of vital importance to monitor the pace of reform. It is wise to reform gradually. Third, the optima of market structure and ownership structure of banking industry take effects on financial stability through economic performance, risk control, credit enhancement and banking supervision. Fourth, Taking the specific situation in banking industry of China,efficient competitions should be encouraged between banks of similar sizes.The contribution of the paper is as follows: first, there is limited research on the banking industry structure and financial stability. This topic has only become the focus of attention recently outside the country, little mention of the study in China. Second, few studies use state utility model with a new institutional economics approach to analyze two-dimensional structure in the banking industry. Finally, the thought of optimizing China's banking structure called"SPGC Frame", which extends the related researches and can be helpful for the policy design.