Research On Effective Financial Regulation And Supervision Of China After The Global Financial Crisis

The global financial crisis which is aroused by U.S. subprime mortgage turmoilfrom2007has made the pattern of world political and economic turbulence. Therefore,till now, the shadow of the financial crisis is not fully dispersed. The post-crisisinvestigation shows, there is inner connection between financial crisis and financialregulation, and the absence and negligence of financial supervision is one major causeof this crisis. Learn from this crisis, all countries paid more attention on financialsupervision, and a series of supervision reformation has been brought out. But,according to the analysis of these measures and the evaluation of the implementationeffect, the reformation of financial regulation remains to be further deepened. Aftercrisis, China has made a series institutional arrangement on financial supervision, andour country would fully implement Basel III. However, practically there still a longway to the ultimate realization of effective financial supervision.This paper emphatically discusses the effective regulation on China’s banking,mainly through historical review, horizontal compare, and empirical study. Byinvestigating the present situation of China’s financial development, although Chinahas made great progress on financial effective supervision, compared to internationalstandards there are still some significant gaps. First of all, the micro foundation ofregulation is still weak, and commercial banks still have great gaps from regulatoryrequirements in corporate governance, risk management capabilities, service andinnovation ability; besides, regulators’ capability of systemic risk regulation isinsufficient, and some effective systemic risk prevention mechanism has not beenestablished; what’s more, there are some highlight financial ecological problems asmacroeconomic imbalance, unsound legal environment, the lacking of implementationof the accounting system, as well as weak market constraints. Specific to theseproblems, this paper makes a full analysis in accordance with core principles andassessment methods of effective banking supervision. The effectiveness of China’sfinancial supervision cannot be fundamentally improved if these problems cannot besolved effectively. Meanwhile, thinking that China’s financial system is in the processof transition, this paper proposes that effective supervision must be combined withdeepening bank reformation and promoting external environment. Based on the factorthat supervision of systemically important financial institutions has been of unprecedented global attention after crisis as well as the circumstances of the reformof specific market microstructure in China’s banking sector in a decade, this paperproposes that the effective supervision of the systemic important bank is the key toeffective financial supervision along with its empirical study. Meanwhile, based onthe comprehensive review of financial supervision capability construction process,this paper makes a full analysis of the impact element on banking regulationeffectiveness in our country as well its empirical study. Otherwise, aim on how torealize effective financial supervision, this paper proposes several political advices onhow to set up financial system which is sustainable balanced, how to reinforce theself-discipline of financial institutions, how to improve financial supervision systemand the external circumstance of it.The character of this paper lies on: firstly, it analyzes the cause of theinternational financial crisis from the view of regulation, reviews the currentmechanism problem of the financial regulatory system, and proposes that theimprovement of effective regulation should start from changing the idea, focus andmethod of regulation. Secondly, under the framework of macro-prudential supervision,it defines the responsibility of regulators from the point of effective regulation.Dealing with non-normal fluctuations of the market, giving investors the right signalsand guidance, monitoring trading behavior of the major players in the market,strengthening the supervision of financial institutions and the internal control ofcorporate governance, and establishing the framework and tools of macro-prudentialregulation should be incorporated into the scope of effective regulation. And, in orderto prevent against systemic risk in the financial system as a whole, it proposes policyrecommendations to improve the financial regulatory. Thirdly, it stresses theregulation of systemically important banks. Supervision of systemically importantbank is the focus of financial regulatory reform of the post-crisis era, therefore thispaper uses CoVaR methods combined quantile regression to quantify the effect of riskspillover between China’s listed banks and the risk contribution rate of individualbank contribute to the whole banking system, and makes the targeted regulatoryproposals on the basis of identification of systemically important financial institutions.Fourthly, it gives the specific criteria about effective supervision frommacroeconomic effects, industry effects as well as supervision efficiency, constructs acomprehensive measurement of regulatory effectiveness index system, and makes anempirical analysis of the effectiveness of China’s financial regulation by usingthreshold regression method, while makes an objective evaluation on the effectiveness of China’s banking regulation from time dimension.