Model Improvement Of Banking Crisis Conduction Mechanism And Empirical Analysis

The outbreak of the subprime crisis in the summer of 2007 triggers a global financial crisis. Compared to previous global financial crisises,this crisis conducts more quickly, spreads to a more broad range, and showed a very obvious banking crisis, investment bank is one of the biggest victims. So which kind of role investment banks play in the conduction of the banking crisis? And do investment banks linked to financial derivatives which lack financial supervision accelerate the conduction of the banking crisis?In this paper, on the basis of sorting out the literature about the intra-industry conduction of banking crisis, it is found that traditional intra-industry conducting models(including information channel conduction, credit channel conduction and conduction in a payment and settlement system)have failed to distinguish the commercial bank and the investment bank in the banking system. With the accelerated development of capital markets in recent years, financial innovation is in an endless stream, investment banks more and more have their completely different effect and status from commercial banks in the modern banking system. As a more realistic consideration, based on the traditional conducting model in the payment and settlement system this paper introduces the investment bank and constructs an innovative model of banking crisis conduction mechanism. The conclussion from the analysis of this model is that investment bank's assets and liabilities have an impact on the crisis conduction, good liquidity of investment banks is beneficial to slow down the crisis conduction and avoid the occurrence of systemic crises, and heavy debt accelerate the crisis conduction.From the praxis, the heavy debt for five consecutive years of top five investment banks before the subprime crisis just accelerates the conduction of this banking crisis. Chapter IV of this paper empirically analyses Japanese banking crisis, Argentina's banking crisis occurred before and this banking crisis triggered by the subprime mortgage crisis, it is found after comparison: the macro-economic background is similar when banking crisis occurs, the difference are the way it occurs, conduction mechanisms and the government's response. Finally, contraposing the actuality of China's banking system safety net, this paper gives some policy recommendations on the central bank to prevent a crisis conducting in the banking system.