The Multidimensional Research On The Situation Of Market Discipline In Chinese Banking Sector

PillarⅢ(market discipline) of the New Basel Capital Accord is the important supplement for the minimum capital requirements(PillarⅠ) and supervision(PillarⅡ). The Commission hopes to establish a set of disclosure requirements and corresponding system, for facilitating market participants to get important information about the scope of application, capital, risk, risk assessment procedures and the bank's capital adequacy ratio and achieving the purpose of promoting market discipline.There are different criteria and angles for evaluating a country's banking supervision level. Suppose the degree of implementation of the New Basel Capital Accord is the main criterion, then the minimum capital requirements and supervision could be the perspective for banks and regulators, but the market discipline gives a more broad way for observation. At the same time, the market discipline is an intuitive signal for evaluating the level of banking supervision and shows a reverse idea for innovation. It can reflect the real maturity level of the market objectively and provide good references for improving the supervision from the theoretical and empirical analysis on the market discipline. The improvement of market discipline is a long-term, voluminous and systematic project, which will create a favourable, fundamental market environment and promote the substantive development of Chinese financial industry simultaneously.Beginning with the theoretical framework of effective market discipline, this paper cards a wealth of related literature and analyses the effectiveness and disputes about the market discipline in depth. And then, based on the revelation for banking supervision from the international financial crisis and the implementation progress of Pillar III in foreign banking sectors, this paper does the theoretical analysis on the constraint conditions and shortcomings for the market discipline in Chinese banking sector preferentially, which is followed by the empirical evaluation in three ways:the market discipline effect of overall commercial banks, the market discipline effect between state commercial banks and joint-equity commercial banks, the market discipline effect between mature listed commercial banks and other commercial banks. The theoretical and empirical analysis shows that:the average effect of market discipline in Chinese banking sector is low, the implicit deposit insurance system from government provides a potential comprehensive safety net, the market discipline effect of mature listed commercial banks shows an insignificant superiority than the average. Finally, this paper proposes policy recommendations for improving the situation of market discipline in Chinese banking sector based on the reality above.