Market Discipline Of Commercial Bank In China

China has gradually change from a planned economy into market economymodel through this three decades,but in the financial industry,development of marketeconomy is not enough from a macroeconomic perspective.Chinese financial industryis still a government-led industry,the control of the financial sector by the Chinesegovernment is strong.The strong control embodied in the nature of state-controlledcommercial banks;The central bank develop the unified deposit and lending rate;Thecontrol of the size of credit and other aspects.Though financil liberalization has beencontroversial,national security and political stability for the financial and otherconsiderations must be necessary for the implementation of financial sectorregulation.But it is undeniable that the financial market increase economic efficiencyin the regulation of resource allocation.So steadily promote financial marketdevelopment for China’s economic development has important practicalsignificance.The indirect financing of Chinese enterprises are still bank loans,fromthe micro perspective of banking.In this context to strengthen banking supervision inChina’s sense of risk is particularly important.In the development of the regulatoryChina Banking Regulatory Commission has been relying on Basel and China’snational conditions.The three regulatory pillars of Baselare:(1)captital adequacyregulation;(2)supervision of regulatory authorities;(3)market discipline.The so-calledmarket discipline is the play of market forces on the risk of the banking sectorconstituted constraints,which form a market-oriented regulatory mechanisms.So the market discipline is the collection of market economy and the regulatorymechanism.As the third pillar of BaselⅡ, market discipline in the regulation ofcommercial banks play an irreplaceable role.This paper aims to use the analytical method from general framework to detailsand combined with finance branch and the important principles of mathematics.Whilethe use of measurement methods and detailed data on market discipline Chinesecommercial banks to conduct theoretical analysis and empirical research.This paperaims to establish a comprehensive study of the subject of market discipline:depositors, crediors,shareholders and the game between the banks and the market discipline bytheory model. In empirical, this paper analyze the actual data of Chinese commercialbanks. Then study the main rules and mechanisms how the market discipline play itsbanking supervision.And explore the development of market discipline in our countrycombined with Chinese reality.This papers draws some conclusion how to promotebanking supervision by market discipline,and make the outlook of the development ofChinese banking regulatory.This paper contains eight chapters.The first chapter is the introduction about thebackground of issues,the ideas,methods,features,and the innovation of this paper.Thesecond chapter is about the reviews of the literature and theory.This chapter reviewthe important documents of the market discipline and related content,and summarizesthe mechanism of market discipline.This chapter discuss the history of marketdiscipline,the general principles of market discipline,the contents of marketdiscipline,subjects(depositors,the investors of subordinated debt,shareholders,etc.)This chaper briefly analyze the conditions of market discipline and also analyzes thecontact of market discipline and the other two pillars.This paper begain to analyze thesubjects of market discipline from the third chapter.The third chapter discuss themarkt discipline from the perspective of depositors.Theoretical part describes themechanism and significance of depositors in market discipline.The empirical partmake a statistical description and quantitative analysis of deposit market.The forthchapter discuss the market discipline from the perspective of subordinated debtmarket.By application of asset pricing theory,we use the mathematical models toderive how subordinated debt investors play the role of market discipline.And analyzethe changes that other related subjects after the introduction of commercial banksubordinated debt. In the light of the large-scale cross-ownership of the subordinateddebts of domestic commercial banks, this paper attempts investigate the implicationof the cross-ownership of subordinated debts, by means of the establishment ofrelated mathematical models and the application of numerical analysis.The fifthchapter analyze the market discipline from the perspective of the shareholders in thestock market transactions.This chapter discusses the content, the significance and theways of shareholders market discipline.The GMM dynamic panel analysis is used to analyze the stock trading market discipline in empirical part.The empirical resultsshow that stock market volatility in trading of non-systematic constitute the marketdiscipline.The sixth chapter discusses the environment that impact marketdiscipline.And commercial banks how to make a game when they face to the marketdiscipline.This chapter also discuss the relationship between market discipline andinformation disclosure.If there are market discipline,or the expection of marketdiscipline,commercial banks will make earing management,capital management andregulatory capital arbitrage game and the external environment impact on marketdiscipline.The seven chapter summarizes the development of market discipline in ourcountry.And also analyze how to practice the market discipline in our country.Theeighth chapter make the general conclusions of this paper and the future researchdirections.This paper draw the conclusions through theoretical and empirical analysis:first,market discipline play an irreplaceable role in commercial banks regulation.Second,Chinese commercial banks’market discipline is also weak,especially in the depositorsand subordinated debt markets. Third, some commercial banks will make earningsmanagement,capital management and other games when they face the marketdiscipline.Market discipline will promote other two pillars of Basel.Fourth,thedevelopment of market discipline in Chinese banking industry is necessary andimportant.So we must strengthen the market discipline,that is important to the healthydevelopment of Chinese commercial banks.