Study On Supervision And Control Of Internet Bank And Its Risks

Internet bank is the most influential innovation in the field of financein 20th century. It leads to an unprecedented transformation of mode ofmanagement and operational concept in banking industry and it promotesthe innovation of organizations and service of banks. With the completionof the transitional period of our country's entry into WTO, foreign bankswill surge into our country and begin to be engaged in RMB business.They will greatly challenge domestic banks with technical measures,managerial methods and experience of managing international capital.Especially, through the method of advanced internet techniques, they canprovide clients intellectualized financial service to make up thedisadvantages of the size of websites. Internet bank will become thefrontier of competition among banks in information age. Therefore, inorder to probe into the theoretical basis of internet bank, it is practicallysignificant for speeding up the construction of internet bank in our countryand quickly reducing the divergence between domestic and foreign banksin terms of internet bank to study the development of internet bank and risksupervision in our country. There are three parts in this paper.The first part probes into the theoretical basis of internet bank. Itbegins with the definition of internet bank and its economic features. Thenit elaborates the developing mode of internet bank, reviews and analyzesthe reason why internet bank comes into being. Compared with traditionalbank, internet bank possesses many prominent economic features, that is,internet bank is virtual bank, "on-line"bank, economic bank, informationbank and innovated bank. The strategic developing modes of internet bankin developed countries can be roughly classified into three categories: first,purely virtual internet bank mode; second, internet bank mode adheres totraditional bank; third, internet bank mode adheres to non-financial organs.At present, internet bank in our country belongs to the second category. Wecan find reasons for the emergence and development of internet bank inmany aspects. According to the "technical promotion theory"of T.HHannon and J.Niehans, new technique, especially the application of newinventions of computer and communication equipments is the main reason.According to the "transaction costs theory"of J.R.Hicks and J.Nichans,reducing transaction costs is the first motive for the emergence of internetbank. According to Huang da's theory of the common relation betweenfinance and economic development, economic development increases therequirement of financing scopes, methods etc of financial organs by largeenterprises, corporations and residents. This requirement is the motivepower of the development of internet bank. In practical review, the mainreasons for the emergence and development of internet bank in developedcountries are: progress in science and technology sets up the basis for thedevelopment of internet bank; development of e-commerce createspromising prospect for internet bank; reducing costs and pursuing profitsare the internal motives for its emergence; change of clients'consumingconcept is the external motive. At last, it analyzes and summarizes theprominent influence of internet bank on finance industry. It not onlychanges traditional banks'operational concept, competition pattern, salesmethods and developing methods, but also reorients clients, businessscopes and financial products, influences traditional banks'function ofsettling accounts and challenges financial supervision.The second part elaborates risks and supervision of internet bank.While Internet bank brings convenience of modern network techniques tothe society, it also brings about new risks. First, legal risks, that is, riskscaused by internet bank operations without any legal modifications or byadopting implicit legal guidance and supervision; second, system risks,including system safety risks of internet bank technical platform, networksafety risks, physical safety risks and application safety risks; finally,business risks, including reputation risks, credit risks, management risks,information asymmetry risks and internet crime risks. The causes ofinternet bank risks are: network cause due to publicity, universality andcirculation of network; moral cause due to the amoral conducts ofindividuals and financial organs; financial innovation cause due to theimperfection of statistics, supervision, early warning and guideline systemof financial risks and that of supervision and control system of internetfinancial risks. On this basis, it thoroughly reviews the mode, rules andcontent of supervision and control of internet bank in America and Britain.The third part proposes suggestions on solution to development,supervision and control of internet bank in our country based on theanalysis of present conditions of internet bank's development anddifficulties of its supervision and control. Internet bank in our country isbranch internet bank established on the basis of traditional bank, it is in thebeginning period of developing internet bank business, and its ways ofbusiness evolve fast and develop in leaps. The development of internetbank in our country confronts the same problem as foreign countries, andbesides, there is difficulty in supervision and control like the lagging innational culture, habits and sense of supervision and control; the internalproblems of bank system in our country (including national reputationproblem of national bank, ownership pattern problem and unbalancedregional development problem); social credit problem; the conflictionbetween mode of separated supervision and control and mixed operation ofinternet bank; bank information disclosure problem; lagging of relevantlaws and regulation and so on. Therefore, according to the situation of our...