A Study Of Banking Regulation Based On The Interactive Relationship Among Official Supervision, Market Discipline And Deposit Insurance

There are few valuable research experiences, systemic methods and theories of banking regulation based on the relationship among official supervision, market discipline and deposit insurance. Therefore, the following methods were applied for this research: estimating the relationship between market discipline mechanism and deposit insurance mechanism based on classical Salop Model in industry economics; estimating the relationship between deposit insurance mechanism and capital adequacy supervision based on mathematical model, computer simulation,and game theory; estimating the relationship between capital adequacy supervision and market discipline based on mathematical models. This paper also make a empirical analysis of the relationship among official supervision, market discipline and deposit insurance based on the practices of China's banking regulation; etc.Meanwhile, some valuable conclusions can be summarized as follows:①Different deposit insurance factors have different influences on the market discipline. The deposit insurance rate moves at the same direction with the intensity of market discipline, while the deposit insurance coverage rate moves at the inverse direction.②Theoretically, there is a optimal capital adequacy level at which banks could realize the balance between risk-taking and discretion under the condition of deposit insurance and capital adequacy supervision, and the social welfare is maximized. And the optimal supervision capital and the exogenous cost of capital complementary can not exist at the same time.③Under the precondition of invisible deposit insurance, the discretionary market exit system is an incredible threat to the commercial bank, by causing huge social cost and welfare loss.④Capital adequacy supervision has some retaining actions on the market discipline. The strengthening of capital supervision will result in the decrease of deposit rate and make it less sensitive to the bank risk. The higher the compensation to depositors by the government is, the weaker the market discipline is. And the lower the bank bankruptcy cost is, the lower the market discipline's sensitivity to the capital adequacy is.⑤Under the same bank system, capital adequacy supervision, market discipline and deposit insurance mechanisms can't work together effectively at the same time due to their interactions on each other.In addition, we obtain implications and recommendations as follows:At present, the official regulation focused on the capital adequacy supervision is China's primary and effective means to ensure financial security . China needs to cultivate the awareness of market discipline, strengthen market discipline to complement official supervision. China needs to improve banks'market exit arrangements, and establish a explicit deposit insurance system. To do that, we should first build up a deposit insurance system, and then proceed to strengthen the market discipline mechanism and improve banks'market exit arrangements.