Part Of The Insured Deposit Insurance System

The global banking supervision had experienced a cycle of regulation and deregulation during last decades. After deregulation, a bank crisis was always followed. During the crisis, regulation restored. When the hurt gradually ran out of the memory, deregulation instead of regulation became very popular and finally a new financial crisis came again. Similarly, the recent financial crisis in 2008 happened under the background of financial deregulation and financial liberalization during last several years.Why does the government supervise banks? How to realize the optimal banking supervision? Under the background of the 2008 financial crisis, how to answer these questions becomes an inevitable subject of the literature world. Through the analysis of the essence of banks, the bank run and its contagion effect, the author brings out the hypothesis of the bankrun systemic risk to answer the question of why the government supervises banks. And with the research target of the optimal bank risk in the banking supervision viewpoint, this dissertation explores the resolution of the optimal bank risk, advocates the ratio of insured deposits of a new partial deposit insurance system as the market measurement of the optimal bank risk, and makes the suggestion of the introduction of the deposit insurance system and depositors' market discipline to perfect China's banking supervision.Firstly, the author begins with the essence of banks for the answer of why the government supervises banks. Banks as financial intermediaries function in the following two aspects. On the one hand, the deposit transaction plays the economic function of providing liquidity to depositors. On the other hand, through the loan transaction the bank acts as the delegated supervisor of depositors.The introduction of the banking intermediary translates the market supervision mechanism of "depositors pre-supervise borrowers" into the delegated supervision mechanism of "depositors post-supervise banks, and banks pre-supervise borrowers" . Thus, there comes a question of who will pre-supervise the delegated supervisor. And also, there implies a systemic risk of a bankrun and its contagion effect in the delegated supervision mechanism of the bank intermediary system. Since the narrow banking, the suspension of payment, the lender of last resort, and the deposit insurance can not effectively eliminate the systemic risk of bankruns, the government employs the authorized supervision mechanism of "the authorized supervisor pre-supervises banks, and banks pre-supervise borrowers" to compensate for the internal defect of the pre-supervision absence of the delegated supervision mechanism. Therefore, the hypothesis of the bankrun systemic risk is proposed to re-interpretate the reasons for banking supervision.Secondly, with the rationality of banking supervision, there comes another question of how to realize the optimal banking supervision. To answer this, the author needs to explore whether there' s a resolution of the optional bank risk and how to measure it under the condition of banking supervision. The author defines the optimal bank risk as the equilibrium risk banks have taken with the supervisor' s target of the optimization of the social welfare, or the optimization of the weighted returns sum of depositors and the bank. Through the construction of game theory models between depositors and the bank, and between the bank and the supervisor, the author resolves the equilibrium bank risk of the optimization of the social welfare. With the resolution of the equilibrium bank risk, a suitable system needs to be designed for the measurement of the equilibrium bank risk. According to the hypothesis of the bankrun systemic risk, banking supervision aims at to eliminate the systemic risk caused by the bankrun, therefore, the introduction of the deposit insurance with both full compensation and partial insurance to resume depositors' market discipline, can eliminate both the bankrun contagion effect and the moral hazard of the deposit insurance. Thus, the ratio of insured deposits can be used as a market measuring index of the optimal bank risk.Finally, the author analyzes the current situation that China' s bank supervision is transiting from the legal supervision to the capital supervision, and China' s implied deposit insurance can not meet the requirement of the future risk supervision, and advocates to realize the transmission from the capital supervision to the risk supervision by the introduction of the deposit insurance system and depositors' market discipline into China' s banking supervision. With this analysis, the author suggests the plan design for China' s new partial deposit insurance system and its environmental optimization.