Validity Analysis Of Banking Supervision

Finance is the core entity of the modern economy. In China, bank assets account for 90% of financial assets. As a result, banking system has holed the balance of modern economy in China. In recent years, finance reforms progressed rapidly. Banking industry developed quickly. At the end of 2006, China fulfilled the commitments of WTO to open up RMB businesses. So, the banking institutions compete more intensly. Currently, the hot topic of our government and the financial sector is how to improve validity of banking supervision in order to inhance the competition capacity of banking industry and mataine stability and safety of banking system. The role of banking supervision became more and more important. As a public policy of the government, the costs of banking supervison are very important. But our government and supervisory authority attach less importance to supervisory costs. There is not so many scholars who concentrate on supervisory costs. Few scholars esimated the costs by establishing models. The thesis has researched the validity of supervision deeply from a cost-benefit point of view. What is efficient banking supervision? What is the mechanism of the validity? How much does banking supervision cost in China? How to improve the efficiency of banking supervision? These are the questions tried to explore in this thesis. By bringing the cost system of supervision into the study of supervision effectiveness, the thesis has provided a comparatively rational method to judge the validity of banking supervision. The thesis will enrich the theoretical fruit of banking-supervision study, and be of tremendous practical significance in facilitating the reasonable utilization of banking supervision resource, promoting the steady operation and innovation of banking sector and the whole financial system.The thesis has defined the validity of supervision from a cost-benefit point of view, analyzed and reviewed related domestic and foreign theories about the benefit (objective and realization) and the cost of banking supervision. The thesis has thoroughly analyzed two aspects of banking supervision: goal & system to achieve the goal, as well as cost & factors that influence the cost. The thesis has combined together the two aspects to discuss theoretically and demonstratively, and at the same time, analyzed the validity of instruments taken in banking supervision. Under such theoretical frame, the thesis has evaluated the two aspects of the validity of banking supervision in China: one is supervision target and its realization degree; the other is demonstrative estimation of cost. Further more, the thesis has analyzed the factors that restrict the effectiveness of China's banking supervision by exploring the supervisor, the supervisee, and the conducting system and supervisory environment. In the end, the thesis has brought forward feasible measures and steps to improve the validity of banking supervision. The thesis consists of eight chapters: Chapter 1 is the introduction; Chapter 2 is the necessary of banking supervision; Chapter 3 is the theoretical summary of banking supervision's validity; Chapter 4 is the analysis of target system and realization mechanism of banking supervision; Chapter 5 is the analysis of cost and CBA of banking supervision; Chapter 6 is the efficiency analysis of banking supervision instruments; Chapter 7 is the evaluation of the banking supervision's validity in China; Chapter 8 is the study on measures to promote the effectiveness of China's banking supervision.The initiatives of the thesis are as follows: (1) The thesis has defined the validity in the two layers of effect and efficiency, carried through a complete summary and evaluation of the theory in banking supervision validity, and especially made a systematic summarization of foreign theories on the cost of banking supervision. (2) The thesis has made a systematic analysis on the goals of banking supervision, and suggested that the goals of banking supervision should be divided into three tiers, they are: the ultimate goal, the medium (common) goal, and analyze the relationship among them. (3) By applying the model created by the Eviews software, the thesis has estimated the direct cost of China's banking supervision from 1994 to 2004. (4) The thesis has discussed thoroughly the three restrictions that inhibit the effectiveness of China's banking supervision: supervisor restriction, supervisee restriction, and conducting system and supervision environment restriction. The thesis has also provided policy suggestions on how to promote the effectiveness of China's banking supervision according to the above three restrictions. There are some problems for the thesis to work on: (1) the evaluation system of benefits of banking supervision. (2) quantitative estimation of indirect costs and benefits of the supervision. (3) how to choose supervisory policies by CBA analysis.