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An International Comparison Of The Structure Of Bank Supervision And Its Implications For China

Posted on:2006-10-27Degree:MasterType:Thesis
Country:ChinaCandidate:L L WangFull Text:PDF
GTID:2156360152480479Subject:World economy
Abstract/Summary:PDF Full Text Request
Banking system plays an important role in a country's financial system. The secure and stable operation of the banking system is critical to the healthy development of financial system. So, we must think much of the banking supervision. Only after we have suitable supervision structure and proper scope of regulation can we help them develop smoothly. First, this paper conducted detailed analysis about Goodhart's theory of the choice of financial supervision. Second, after examining the evolution process of supervision structure of U.S. UK and Japan, I concluded that supervision system changes as financial system develops, and decision making of which supervision system to choose is based on the domestic financial market's development. Finally, it examined the problems of China's banking supervision at the current stage. Learning from the experiences of the typical foreign countries as to which supervision system to choose, it make suggestion on establishing supervision system, supervision organizations in China over the long run.The first Chapter,first analyzed the theory of finance supervision and then the rationale for bank supervision structure. On one hand, because bank's reserve money is small compared to the amount they lend, they expose to liquidity risk once they have mal-management problem or take on too much risk. At the same time, to pursue high return, some banks are doing such high risk investment that if they fail, due to the nature of information release, they will have fierce competition, or even go bankruptcy. On the other hand, financial system has the characters of monopoly, asymmetry, moral hazard and negative externality. Thus, it is very easy to cause bank crisis, which could badly affect healthy operation of banking system, and even of the whole financial system. Based on the above two aspects, it could realized that it is critically important to enforce banking supervision.The structure of supervision is the foundation of implementing supervision, so main purpose of the article is put on explaining the structure of bank supervision. There are three broad approaches to the structure of regulation: institutional, functional and objective. In the institutional approach, regulation is directed at financial institutions irrespective of the mix of business undertaken. As a result, the approach can't meet the challenge of mix of business and financial-holding companies. Merton(1995) take the view of functional regulation which focus on the business undertaken by institutions irrespective of which institutions are involved. But this approach have disadvantages too. The obvious problem with a purely functional approach is that the position of the institution as a whole may be obscured, especially with respect to overall risk and solvency, because no agency is clearly responsible fro the prudential management of the institution as an entity. Besides, it may not be appropriate for the emerging countries. The other approach which can meet the challenge of the changing environment is the objective approach. It hold the view that the ultimate criterion for devising a structure of regulatory agencies should be the effectiveness and efficiency of regulation in meeting its basic objectives. Accordingly, the most appropriate basis for organizing institutional structure is to focus directly on the objectives of regulation. It's quite different from the previous approaches and meaningful for us. But it's on the initial stage, so we have to be prudential to use it.The second chapter picture the development of regulation structure in the US, England and Japan. Shocked by universal banking system and functional perspective, some developed countries such as British, Japan and America reform their supervision organization structure so as to accommodate themselves to financial integration. English establish a mega regulator the FSA; after the Financial Services Modernization Act, American adopted umbrella-structured supervision system where the FRB have the unique power and several...
Keywords/Search Tags:Bank supervision, Structure of bank supervision, International comparison
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