The Research For Developing Regional Small And Medium Banks From Perspective Of Financial Stability

The development of regional small and medium banks includes inceasing its quantity and enhancing its operational efficiency. Increasing the quantity of regional small and medium banks can enhance the vitality of competition in regional bank marketing,and at the same time promote the improvement of operational and allocative efficiency of the banking system. However, the small and medium banks has more inherent vulnerability by reason of high debt operations and small size,and its ability for spreading risk is more insufficient compared to big banks.At the same time,the failure of small and medium banks has strong externalities that it may have an impact on the banking system and economy. Consequently,it's necessary to research the development of small and medium banks on the premise of financial stability.Firstly,this article divides regional banking stability into two aspects:stability of individual bank and banking system. The competition in the market certainly reflects the law of "survival of the fittest" that the aborted banks in operation are eliminated.Concerns should focus on making the degree of harm the aborted banks bring to banking system minimize.Then,this article analyzes the influence of developing small and medium banks on the regional banking stability,which includes the following two ways:the influence on bank's allocative efficiency and risk behavior by inceasing the quantity of small and medium banks. When there is only one bank(monopoly), the credit market is inefficient that the credit capital is insufficient and the price of capital is higher, which will bring about bad effect on the regional banking stability. When the quantities of small and medium banks make the market close to perfect competition, small and medium banks has infinite motive to take risks for extra profits,which will make the regional banking system great vulnerable.In light of the analysis, effective competition is necessary for developing small and medium banks.Good market entry and exit mechanisms about small and medium banks are in favor of the effective competition and stability of regional banking system.It can judge the change of market structure including the number of banks by measuring the degree of competition in regional banking. The H-statistic can provide quantitative basis for adjusting the policy about market entry and market exit of regional small and medium banks. Take Hunan province for example,this article makes an empirical analysis on the degree of banking competition currently.Finally,this article give som advices about improving the market entry and exit mechanisms of small and medium banks according to current situation in our country.